This article focuses on Internal Revenue Code Section 2042(2), an Estate Tax provision which includes life insurance proceeds in the gross estate of an individual who dies possessing an "incident of ownership" in the policy. In the often cited United States v. Rhode Island Hospital Trust Company, 355 F.2d 7 (1st Cir. 1966), the Court of Appeals emphasized the pre-eminent role of "policy facts" (the terms of the contract of life insurance) in the determination of whether a decedent holds such an incident. There has been some confusion in the subsequent cases as to the degree to which it is permissible to look to factors beyond the terms of a life insurance policy to resolve questions of includability under section 2042(2). This article examines the treatment of outside factors in the decided cases, and demonstrates how results can vary depending on the nature of a particular factor and the effect that it has on the policy terms, i.e., whether the outside factor would effectively add a provision to, or delete a provision from, the contract of insurance. The author seeks to find order in the inconsistent case law and suggests a rational approach for dealing with the issue in the future.
Richard L. Haight,
Policy Facts and Incidents of Ownership under Estate Tax Section 2042(2): The Legacy of Rhode Island Hospital Trust,
Duq. L. Rev.
Available at: https://dsc.duq.edu/dlr/vol28/iss1/6