Shared Ownership Based On State Property & Federal Tax Law

The concept of shared ownership was conceived and developed by Fredrick L. Fisher and John Terakedis Jr., partners in the Columbus, Ohio law firm of Schottenstein, Zox & Dunn Co., L.P.A. The shared ownership program was designed for use with variable universal life after extensive review of federal transfer tax law and state property and insurance laws.

Both state property law (in all 50 states) and federal tax law recognize that a life insurance policy is property, which may be contractually owned by more than one party.

Even as far back as 1911, the United States Supreme Court recognized this fact. Justice Oliver Wendell Homes wrote, “[L]ife insurance has become in our days one of the best recognized forms of investment and self-compelled savings. As far as reasonable safety permits, it is desirable to give life policies the ordinary characteristics of property.” Grigsby v. Russell, 52 S.Ct. 58, 56L.Ed. 133 (1911).

During the past three decades, the Internal Revenue Service has also repeatedly supported the position of divided interests in life insurance contracts.

The shared ownership concept also has “more likely than not” tax opinion letters from Schottenstein, Zox and Dunn and the St. Louis, Mo. law firm of Husch and Eppenberger. A “more likely than not” opinion is the highest level of tax opinion that a law firm may be expected to provide.

Patrick Smith


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 15, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.