Supreme Court Weighs In on Corporate-Owned Life Insurance

It’s common practice for buy-sell agreements to be funded with life insurance. How does this impact for estate tax purposes the value of a deceased owner’s estate? In one case, a corporation owned policies on the lives of its two owners, who were brothers. When one brother died, the proceeds were used to redeem his shares. The decedent’s estate did not increase the value of his portion of corporate ownership by the life insurance proceeds, but the U.S. Supreme Court, in a unanimous decision, said it should. Life insurance proceeds earmarked for a stock redemption increase the value of the corporation, which in turn, increases the deceased owner’s interest includible in his/her gross estate. #IdeaoftheDay