99 / If a donor dies within three years of making a gift of a life insurance policy on the life of another, is the value of the policy includable in the donor’s gross estate?

No. IRC Section 2035 brings back into a decedent’s estate certain gifts made within three years of death. The bring-back rule of Section 2035 applies to a transfer of an interest in property that is included in the value of the gross estate under IRC Sections 2036, 2037, 2038, or 2042, or would have been included under any of these sections if such interest had been retained by the decedent. IRC Section 2042 has to do with proceeds of insurance on the life of the decedent.

IRC Section 2033 (which includes property in which a decedent had any interest at all) governs whether the value of a policy owned by the decedent on the life of another is includable in the decedent’s estate. A transfer of an interest in property included in the value of the gross estate under Section 2033, or that would have been included under Section 2033 if the interest had been retained by the decedent, is not among the enumerated sections under the bring-back rule of Section 2035. Thus, the value of a policy owned by a decedent on the life of another and transferred by the decedent within three years of the decedent’s death (occurring after 1981) will not normally be brought back into the decedent’s estate under Section 2035.