What must a father do to pass his life insurance policy to his son and avoid estate tax liability?

To effectively pass a life insurance policy to his son and minimize estate tax liability, the father should appoint his son as an absolute assignee of the policy. This means that the father transfers full ownership of the policy to his son, allowing him to have complete control over it, including the right to change beneficiaries, cash the policy, and take out loans against it.

By making his son the absolute assignee, the policy is removed from the father’s estate for estate tax purposes. If the father retains ownership of the policy, the death benefit would be included in his estate, potentially leading to significant tax liabilities upon his passing. Thus, transferring ownership effectively mitigates these tax implications.

In contrast, options such as making the son a contingent beneficiary or continuing to pay the premiums themselves do not address the estate tax issue, as they do not remove the policy from the father's estate. Appointing his son as a contingent beneficiary means the son receives the benefit only if the primary beneficiary is no longer alive, which does not affect ownership or estate tax liability. A court order might be more complicated and is not necessary in this context when a clear transfer of ownership can be established through an absolute assignment.