Incidents of ownership is a legal term indicating a factor indicating legal title to property for federal estate tax purposes. For example, if a decedent possessed any incidents of ownership over property, the property would be included in his/her estate for federal estate tax purposes.
In examining an insurance policy, the term "incidents of ownership"' is not limited in its meaning to ownership of the policy in the technical legal sense. Generally speaking, the term has reference to the right of the insured or his estate to the economic benefits of the policy. Therefore, it includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy, to revoke an assignment, to pledge the policy for a loan, or to obtain from the insurer a loan against the surrender value of the policy, etc. Incidents of ownership are frequently described as rights to a life insurance policy's "economic benefits". Incidents of ownership can be major estate planning factors for policy owners who wish to transfer policy ownership from themselves to another person or a trust, thereby removing the policies from their estates.
