218 / May the annual exclusion of $19,000 for gifts to each donee be applied against gifts of life insurance policies and premiums?
Yes, if the gifts are made in such manner that they are gifts of present interests.
The annual exclusion of $19,000 in 2025 (up from $18,000 in 2024, $17,000 in 2023 $16,000 in 2022 and $15,000 in 2018-2021)1, is not available for gifts of future interests ( Q 219). If the gift of the policy is a gift of a present interest, premiums subsequently paid by the donor also will qualify for the exclusion ( Q 223). The annual exclusion is effectively $38,000 in 2024 (2 × $19,000) if the donor makes a gift to a third party with the consent of his or her spouse ( Q 117). For gifts from one spouse to another, see Q 114.2
Example. Donor, a widower, assigns a policy on his life to his son in 2025. The policy’s value is $19,000. The gift tax annual exclusion of $19,000 (in 2025) can be applied against the gift of the policy. The donor may continue to pay the annual premium of $1,500 in subsequent years and need not report the premium payments for gift tax purposes so long as they fall within the gift tax annual exclusion for such subsequent year (unless he gives his son other gifts in any one year that together with the premium payments exceed the annual exclusion for such year).
When the value of a policy exceeds the annual exclusion, the insurance company may consent to split it into two or more smaller policies. By giving the donee one policy in each of several succeeding years, the entire value can fall within the annual exclusions. In some instances, however, such a split would result in a higher premium.