If you own a life insurance policy worth a million dollars or more, there’s a decent chance it’s quietly working against your estate plan instead of for it. That’s true for a lot of Rockland County families I meet, even ones who did everything else right.
Ownership, Not the Beneficiary Form, Decides the Tax Outcome
The Internal Revenue Service (IRS) does not care who cashes the check. It cares who controlled the policy while you were alive. If you could change the beneficiary, borrow against the cash value, or cancel the coverage, the IRS still treats you as the owner, and the full death benefit is pulled back into your taxable estate even though it skipped probate entirely.
Why This Matters for Larger Policies Held by Rockland Families
I see this constantly working with clients in New City, Nyack, and Spring Valley who spent decades building a policy meant to protect their spouse or children, only to learn it could push their estate over New York’s exemption threshold, which sits at $7.35 million in 2026. Cross that line and the entire estate becomes exposed under the state’s tax cliff, not just the excess.
How the Trust Structure Removes the Policy Entirely
That is why I advise clients with substantial coverage to consider setting up an irrevocable life insurance trust that owns the policy in place of them. The trust applies for the coverage, or an existing policy is transferred in, and the trust itself is named beneficiary. Because you give up every string of control, the IRS no longer counts you as owner, and the payout stays outside your taxable estate.
The Three-Year Rule Catches People Off Guard
If you already own a policy and transfer it into a newly formed trust, a three-year lookback applies. Die within that window and the proceeds are pulled back into your estate as if the trust never existed. Having the trust apply for a brand-new policy avoids this problem from the start.
I have guided Rockland County residents through this exact planning for years, and the families who act before a health issue or age makes new coverage difficult are the ones who benefit most. The structure is not complicated, but it has to be set up correctly, and often well ahead of when you think you will need it.
If your loved one left behind a life insurance policy which needs to be kept out of the taxable estate, contact Roman Aminove today for a free phone consultation.
Contributed by Dan Rose, a local business writer specializing in life insurance and estate tax planning services in New York City.
Roman Aminov Estate Law firm of Queens
147-17 Union Tpke, Kew Gardens Hills, NY 11367, United States
P59P+93 Kew Gardens Hills, Queens, NY, USA
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