Proceeds of a Life Insurance Policy with Irrevocable Beneficiary Designation Do Not Form Part of the Gross Estate of the Deceased

October 7, 1987 BIR RULING NO. 310-87 88 (e) 000-00 310-87 Gentlemen : This refers to your letter dated September 4, 1987 requesting confirmation of your opinion to the effect that proceeds of a life insurance policy with a "Special Irrevocable Beneficiary" designation do not form part of the gross estate of a decedent subject to estate tax. In reply thereto, I have the honor to inform you that your opinion is hereby confirmed. Pursuant to Section 88(c) of the Tax Code, as amended, proceeds of life insurance form part of the gross estate of the decedent "to the extent of the amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable." Accordingly, the taxability of insurance proceeds will depend on whether or not the designation of the beneficiary thereof is revocable or irrevocable. Where the designation of the beneficiary is revocable, the proceeds of a life insurance policy form part of the gross estate of the insured upon his death, even if he failed to exercise his right or option to revoke that designation. As part of the estate, said proceeds are subject to the estate tax. On the other hand, if the beneficiary is irrevocably designated, the right to the proceeds of the life insurance policy, upon the death of the insured immediately vests on the beneficiary in which case, said proceeds no longer form part of the gross estate of the deceased. Such being the case, they are not subject to estate tax. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner