Estate Transfer

What Does Estate Transfer Mean?

An estate transfer refers to the conveyance of all valuable possessions of an individual, including property, investments, and life insurance, to their heirs. In the context of life insurance, the policy can be transferred as part of the estate to avoid incurring estate tax on the death benefit.

Insuranceopedia Explains Estate Transfer

There are generally four methods for executing an estate transfer, with the most common being a will (probate asset). The other three methods include non-probate assets, gifting of assets, and family trusts. However, all three of these methods must be carried out in conjunction with a written will. An estate plan without a will is considered intestate, which means that the heirs of the decedent may be excluded from the estate distribution.

Life insurance is a significant component of the decedent’s estate plan and is not subject to estate tax. It can be transferred to heirs as a trust or gift; alternatively, ownership can be transferred to the beneficiary before the death of the insured. However, life insurance proceeds may be subject to tax in the following situations: if the proceeds are paid to the executor of the decedent’s assets, if the decedent still owns the policy at the time of death, if ownership of the policy is transferred within three years of death, or if the spouse is a beneficiary and also dies after receiving the payout from the policy.