Estate planning: the inclusion of the proceeds of a life policy when the accrual is calculated

Life policies play an important role in estate planning, and the correct application of the proceeds is necessary to determine the effect on the accrual calculations at the dissolution of a marriage (upon the death of the first-dying spouse) in order to determine the correct insured amount required. The accrual of either spouse is calculated at the dissolution of the marriage, which is at the moment of death. If the proceeds of a life policy form part of the net estate at the moment of death, then the proceeds are included in the net estate of the spouse when the accrual is calculated. Consequently, the right to payment should vest at the moment of death for the proceeds to be included. Taking into account the different ways of structuring a life policy (policyholder, insured and nominated beneficiary), the moment that the right to payment vests will depend on who is entitled to the proceeds: the policyholder or a nominated beneficiary.