Life Insurance Proceeds
Life insurance proceeds may be subject to estate tax if you retain any powers over the policy (such as the right to change the beneficiary or borrow against the policy) or the proceeds are made payable to your estate.
You can transfer a policy to certain life insurance trusts at least 3 years before you die, or you can give money to the trust to buy a new policy and pay the premiums. The proceeds will be free from estate tax, although your initial gift and the premium payments may be subject to the gift tax.
If the trust is properly structured, the insurance proceeds will still be available to meet the liquidity needs of your estate.