Detailed Answer
(d) The requirement is to determine the amount of
insurance proceeds included in Burr’s gross estate with regard to
a policy on Burr’s life purchased by Adam in connection with a
’buy-sell’ agreement funded by a cross-purchase insurance arrangement.
The gross estate of a decedent includes the proceeds
of life insurance on the decedent’s life if (1) the insurance proceeds
are payable to the estate, (2) the proceeds are payable to
another for the benefit of the estate, or (3) the decedent possessed
an incident of ownership in the policy. An ’incident of
ownership’ not only means ownership of the policy in a legal
sense, but also includes the power to change beneficiaries, to
revoke an assignment, to pledge the policy for a loan, or to surrender
or cancel the policy. Here, since the policy owned by
Adam on Burr’s life was not payable to or for the benefit of Burr’s
estate, and Burr had no incident of ownership in the policy, the
full amount of insurance proceeds would be excluded from Burr’s
gross estate.