Who should own a life insurance policy — the insured or someone else?

The question of who owns a life insurance policy matters most for estate planning purposes. In most straightforward situations, the insured owns their own policy. But for estate planning and tax purposes, having someone else own the policy can be more advantageous.

Self-ownership: the most common arrangement. The insured applies for, owns, and pays premiums on their own policy. The death benefit is included in the insured's taxable estate — which may matter for larger estates subject to federal estate taxes.

Third-party ownership: a spouse, adult child, or irrevocable trust can own the policy. If owned by someone other than the insured, the death benefit may be excluded from the insured's taxable estate — a significant advantage for estates approaching or exceeding the federal estate tax exemption.

Irrevocable Life Insurance Trust (ILIT): a common estate planning structure where the trust owns the policy, pays premiums (funded by the insured through annual gifts), and distributes death benefits according to the trust terms. This keeps the death benefit outside the taxable estate while allowing the insured to direct how it is used.

Nevada's favorable trust laws — including dynasty trusts and self-settled asset protection trusts — make ILIT structures especially powerful. Nevada residents with larger estates should discuss policy ownership with a Nevada estate attorney. Agents in our network can coordinate with estate counsel to structure ownership correctly.