321 / If life insurance is owned by and payable to a partnership or corporation to fund purchase of an owner’s business interest, are proceeds includable in the insured owner’s estate?

No.

Because proceeds are not payable to an insured’s estate and the insured has no incidents of ownership in the policy, at least in the insured’s capacity as an individual, the proceeds are not includable in the insured’s gross estate.¹ The same result should occur where a business owns the insurance but proceeds are payable to a trustee who must use them to purchase an insured’s business interest for the partnership or corporation.

The value of a business interest is, of course, includable in an insured’s gross estate.²