Life Insurance Policy Valuation
The value of life insurance policies is important anytime there is a change in ownership. Some changes in ownership can trigger unfavorable income tax consequences such as having the proceeds includable in the estate or having the proceeds subject to income tax.
Normally someone would go to the insurance company to have them fill out IRS Form 712, giving the value of the insurance policy. However, depending on the company and the policy, you may get a number having no basis in reality; several numbers with the caveat that your professional should choose the appropriate one; or some companies won’t give you anything at all.
Additionally there are some situations where that value is not usable: when fair market value is the consideration.
There are various code sections and pronouncements about valuing a policy under specific fact patterns. Regardless of what is being done with a policy, a fair market value appraisal done by a certified appraiser is the gold standard. We can consult with you about your specific circumstances and discuss options with you. Sometimes an appraisal is needed – other times not. We can help you decide.