The 'transfer-for-value' rule can cause a normally income-tax-free death benefit to become partly taxable when:

Giải thích

Under the transfer-for-value rule, if an in-force policy is transferred to another party for valuable consideration, part of the death benefit (the amount exceeding the buyer's basis) can become taxable, unless an exception applies. Simply keeping a policy, paying annual premiums, or naming a spouse as beneficiary does not trigger the rule. The rule exists to prevent policies from being traded as tax-free investment vehicles, and producers must flag it whenever a policy changes hands for value.