Question
What is the name of your state CA
Is a gift taxable if my spouse and I want to give our dauchter
ownership of an insurance policy covering my wifes life, with a
cash value of $20,000, i.e. less than the annual exclusion for the
calendar year for both of us?
Now our dauchter is a beneficiary of this policy.
Answer
What do you mean ownership--will she be paying the premiums or will you still be doing that?
There is no tax to be worried about here since she is not receiving financial benefit--and there probably won't be any tax to her when she receives the payout after you die.
DANDY DON IN OKLAHOMA (tiekh@yahoo.com)
Answer
Not sure what benefit there would be to making her the owner of the policy. As beneficiary, I do not think there would be any tax for the death benefit.
If you wanted to surrender the policy and give her the cash value, the owner would have to pay any income tax on the amount exceeding payments, and you and your wife would each need to write her a check for less than the $11,000 per person per year gift exclusion (or properly documented lifetime exclusion). See
Depending upon your age, employment, financial knowledge, eligability, and whether you currently support your daughter, it might actually be to your advantage to surrender the policy and invest it (possibly as contributions to a Roth IRA with her named as beneficiary). I just surrendered a whole life policy I no longer needed at age 53 and made 5.76% in a month with a stock purchase and 1.29% in 4 days in a Roth IRA mutual fund (your mileage may vary, significantly!).