118 / Does an employee covered under a survivor income benefit plan make a gift of the survivor benefit for federal gift tax purposes?
No.
Under a survivor income benefit plan, an employer provides an income benefit for certain survivors designated by family or marital relationship to the employee. An employee does not make a gift of the survivor benefit at the time of death.1 Note that neither Revenue Ruling 81-31 nor Estate of DiMarco v. Commissioner addressed whether an employee should be treated each year as (1) receiving compensation equal to the value of providing a death benefit or survivor income benefit to an eligible survivor if the employee died during the year, and (2) transferring such value to the eligible survivor. The use of the annual exclusion and the marital deduction might protect such a gift from any gift tax. (See Q 100 for estate tax aspects and Q 260 for income tax aspects.)
1. Rev. Rul. 92-68, 1992-2 CB 257, revoking Rev. Rul. 81-31, 1981-1 CB 475 (in which the Service treated an employee as making a gift of the benefit from a death-benefit-only plan in the year of the employee’s death); Estate of DiMarco v. Commissioner, 87 TC 653 (1986), acq. in result, 1990-2 CB 1.