IRS Wrongfully Included Death Benefits in Estate Tax Calculation

The IRS shouldn’t have increased an estate’s value for tax purposes by the value of death benefit proceeds from two life insurance policies because neither the decedent nor estate held a right to those policies’ benefit, the US Tax Court said Tuesday.

Larry Becker created an irrevocable life insurance trust for the benefit of his wife, children, and grandchildren, which held policies on his own life. Becker didn’t preserve any beneficial interest in the trust or control over how it administered its assets. Obligations for future premiums were paid by a contracted outside entity, LT Funding LLC, in exchange for ...