Policy ownership transfer is the change of legal ownership of a life insurance policy from one party to another. The policyowner controls rights such as changing beneficiaries, accessing cash value, assigning the policy as collateral, and electing settlement options. Ownership can be transferred by absolute assignment, gift, sale, or as part of a business or estate planning transaction. Transfers may have significant tax and legal consequences, including potential gift tax, income tax under the transfer-for-value rule, and estate inclusion issues under Sections 2035 and 2042. Proper documentation, including carrier ownership change forms and, when appropriate, collateral assignment or trust documents, is essential to ensure that the transfer is legally effective and matches the client's broader planning objectives.

In everyday practice, policy ownership transfer arises when clients move personal policies into irrevocable life insurance trusts, shift corporate-owned policies to shareholders, or transfer coverage between spouses or business entities. Advisors coordinate with attorneys and tax professionals to determine whether the transfer should be a gift, sale, or part of a buy-sell or split-dollar unwind. They ensure that carrier forms are completed correctly, that premium payments continue from the appropriate account, and that new owners understand their responsibilities. Documentation of the effective date, consideration (if any), and related agreements is kept in the client file. Careful planning around policy ownership transfer helps avoid transfer-for-value problems, unintended estate inclusion, and disputes among beneficiaries at claim time.