hard · Certified Financial Planner Risk Management
The Fenwick household owners have decided to fund their new cross-purchase agreement with permanent life insurance. One owner wants to transfer a policy he already owns on himself to the other partners to save on premium costs.
What is the planner's most appropriate advice regarding this transfer?
- Recommend the transfer as it is the most cost-effective way to fund the agreement.
- Advise against the transfer, as it may trigger the transfer-for-value rule and estate inclusion.
- Suggest the transfer but only if the policy is over 3 years old to avoid Section 2035. In this case
- Approve the transfer as long as it is done at the policy's fair market value.
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