If a corporation is designated as the owner and irrevocable beneficiary of a life insurance policy, what happens to the death benefit?

When a corporation is designated as the owner and irrevocable beneficiary of a life insurance policy, the death benefit from that policy is excluded from the decedent's gross estate. This is because the death benefit is paid directly to the corporation rather than to the individual who has passed away.

Under current tax laws, specifically in regards to estate taxation, if the policyholder does not own the life insurance policy at the time of their passing, and it is owned by a corporation, the value of that policy and the death benefit will not be included in the gross estate of the decedent. This exclusion helps to minimize the estate tax burden on the individual's estate, as the proceeds are not counted among the assets that are subject to estate taxes.

It's important to note that other scenarios, such as if the individual had retained ownership of the policy or if the beneficiary were a different type of beneficiary, could lead to different tax implications. However, in this specific case, the corporation's status as both the owner and beneficiary leads to the exclusion of the death benefit from the gross estate.