Purchasing vs. Gifting a Policy: The 3-Year Rule
By Tony McKillip
Trusts and Estates,
April 2025
The IRS's three-year look back policy, commonly known as the three-year rule, poses a significant challenge for those looking to transfer existing life insurance policies to an Irrevocable Life Insurance Trust (ILIT). Under this rule, if an insured individual transfers a policy to an ILIT and passes away within three years of the transfer, the entire policy proceeds are included in the insured’s gross estate.
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