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To: Jon Koplik who wrote (123300)	8/18/2002 11:13:42 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 152472

Banning this form of transfer of wealth to the beneficiaries on an insurance policy is going to create a lot of headaches for many people. My understanding of the problem, based on discussions with estate lawyers, is somewhat different than the approach taken by the Treasury Department. Say Mr. X knows he has little time left. He buys a $10 million life insurance policy, naming his children as beneficiaries. Mr. X pays a huge premium, perhaps $2 million. Mr. X dies, and the insurer pays his children the $10 million, which, being an insurance payment, is tax free. The question is whether the $2 million premium is simply subtracted from the assets of Mr. X before his death, or whether, because of intent, it should be considered a taxable gift to his children. Even if the premium could be taxed as a gift, the tax would still be less than the current rate for the estate tax. Maybe the Treasury Dept. can argue for some tax on this transfer, but I don't think whatever they do can erase the tax-free status of an insurance payment for loss. JMHO. Art