Life Insurance
(b) For inheritance tax purposes. An
absolute assignment of an insured's interest in a
group life policy, made at least 3 years before the
insured's death, will generally remove the
insurance proceeds from the insured's estate.
Current Federal estate tax law allows an unlimited
marital deduction for that portion of the gross
estate passed to a surviving spouse. Thus, there is
no apparent immediate tax advantage to assigning
ownership of a life insurance policy to a spouse.
However, since State tax laws vary and tax savings
under Federal or State law can be considerable if
insurance proceeds are not subject to estate taxes,
it is important to consult with, and rely on, the
advice of a competent estate tax advisor.
The Office of Personnel Management
assumes no responsibility or obligation with respect
to the validity, sufficiency, or the consequences of
an assignment under the Internal Revenue Code.
If an insured owns more than one
type of coverage--both basic and
standard optional, for example--he
or she must assign all of the
A determination whether the FEGLI proceeds are
included in the insured's gross estate must
ultimately be made by the Internal Revenue
Service at the time of the insured's death. In
attempting to determine the tax effect of an
assignment, the assignor should refer to tax laws,
case law, and IRS regulations. In addition, the
assignor should consider obtaining a ruling from
the IRS.
If an insured owns more than one type of
coverage--both basic and standard optional, for
example--he or she must assign all of the
insurance. An insured may not assign only a
portion of the coverage. Family optional insurance
may not be assigned. An insured may not name
contingent assignees in the event the primary
assignee predeceases him or her. If the
assignment of the insurance is to two or more
persons, the insured must specify percentage
shares, rather than dollar amounts or types of
insurance, to go to each assignee.
Once insurance is assigned, the assignee to
whom the insured transfers FEGLI ownership
may, for the insurance assigned to him or her: (1)
designate beneficiaries, (2) convert the insurance
to an individual policy if the insured's eligibility
for group insurance ceases, and (3) cancel the
insurance or reduce the amount of coverage.
When insurance is assigned to more than one
person, these people must agree when exercising
the right to cancel or reduce coverage.
The assignor also continues to be
responsible for premium payments
The Federal employee or former employee
(assignor) retains the right to elect new insurance
coverage, though all new insurance (excluding
family optional insurance) is subject to an existing
assignment. The assignor also retains the right to
decide, at time of retirement or receipt of workers'
compensation, to maintain more than the minimum
percentage of his or her basic life insurance. The
assignor also continues to be responsible for
premium payments under the group policy.
Premium payments will continue to be withheld
from the assignor's pay, annuity, or compensation.
An assignment is not to be confused with a
designation of beneficiary under the FEGLI
Program. A Federal employee or former
employee may designate a person or legal entity to
receive any FEGLI insurance payable at death.
Designations of beneficiary do not convey any
ownership rights under the insurance policy and
can be changed by the Federal employee or former
employee at any time. Upon assigning FEGLI
coverage, however, the employee or former
employee gives up the right to make a designation
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