Assignment of
Life Insurance
If you wish, you may irrevocably (one time only) assign your life
insurance to another person or persons, including an individual,
a corporation or an irrevocable trust.
Assignment means that you agree to give up ownership of your
Basic, Standard Optional (Option A), and Additional Optional
(Option B) life insurance coverage forever.
If you have elected Living Benefits (see page 12), you may not
assign your life insurance. If you assign your insurance, neither
you nor the assignee(s) may elect Living Benefits.
The decision to assign life insurance is yours alone and may be
made only with your consent ' Assignments of insurance are
generally made to comply with the requirements of a court order
upon divorce, for inheritance tax purposes, to obtain accelerated
death benefits, or to satisfy a debt.
(1) To comply with a court order-You may assign your coverage in
order to comply with a court order for divorce. Frequently, the
court will order a Federal employee to name a former spouse as
the life insurance beneficiary. However, under the FEGLI law, an
insured person may change his or her designation of beneficiary
at any time. Assigning FEGLI coverage to a former spouse provides
a means for you to assure the court that FEGLI benefits will be
payable to a former spouse or his or her designated beneficiary.
(2) For inheritance tax purposes-If you assign your coverage at
least 3 years before your death, the
insurance is considered a gift to the assignee, rather than part
of your estate. Current Federal estate tax law allows an
unlimited marital deduction for that portion of the gross estate
passed to a surviving spouse, Thus, there is no apparent
immediate Federal tax advantage to assigning ownership of a life
insurance policy to a spouse. However, State tax laws vary and
tax savings under Federal or State law can be considerable if the
estate is large and ownership of a life insurance policy is
assigned to children or to a trust.
The Office of Personnel Management and the Office of Federal
Employees'Group Life Insurance assume no responsibility or
obligation with respect to the validity, sufficiency, or the
consequences of an assignment under the Internal Revenue Code. A
determination as to whether the FEGLI proceeds are included in
your gross estate must ultimately be made by the Internal Revenue
Service (IRS) at the time of your death.
(3) To obtain cash b6fore death-You may assign your coverage to a
viatical settlement firm. Viatical settlement refers to the
"sale" (or assignment of ownership) of life insurance
for cash. You might wish to do this if you are terminally ill and
wish to obtain a portion of the value of your life insurance
before your death. On or after July 25, 1995, if you are
terminally ill you will have a choice of obtaining funds prior to
your death by assigning your life insurance to a viatical
seftlement firm or by electing FEGLI Living Benefits (see page
12). Your decision will likely be based on the amount of funds
you can obtain from each source and your life expectancy.
Viatical settlement firms often consider requests from
individuals with life expectancies up to 24 months or sometimes
longer. The FEGLI Living Benefits provision only applies to
individuals with life expectancies of 9 months or less.
Assignment covers Basic, Option A and Option B. Living Benefits
only covers Basic insurance.
(4) Tosatisfyadebt-Youmayassignyourcoveragetoi a debtor to
satisfy a debt. However, remember that I even if you subsequently
pay off the debt, your insur- I
ance is still assigned and you cannot cancel theI
assignment.
You can never change the assignment nor can you cancel, it.
However, an assignment is automatically cancelled if you return
to Federal service after a break in service of at least 180 days.
If you assign your insurance, you must continue to pay the life
insurance premiums, which will continue to be withheld from your
salary or annuity.
If you assign your life insurance, yop also assign:
(1) Your right to cancel your insurance coverage;
(2) Your right to designate and change beneficiaries;
(3) Your right to convert to a private insurance policy when your
FEGLI coverage terminates for any reason other than cancellation
by the assignee(s);
(4) Your right to change the reduction schedule on yourI
Basic Life insurance coverage at retirement after
you (the insured) make the original election.
If you assign your insurance to more than one person,
all assignees must agree to the actions taken with the
insurance, although each may designate his/her own
beneficiary(ies).
If you assign your insurance, you must assign 1 00 percent of
your insurance, although you do not need to assign it all to the
same person, firm or trust. You must assign percentages of your
total insurance (not dollar amounts) and the percentages must add
up to 1 00 percent.
You cannot assign:
(1) Family optional insurance (Option C);
(2) Your right to elect more insurance coverage. However, all of
the new insurance (except for family optional insurance) that you
elect after your assignment will automatically be subject to the
existing assignment;
(3) Your right at retirement to make the original election of the
reduction schedule on your Basic Life Insurance. However, once
you make this election, you cannot later elect to change to the
maximum (75%) reduction schedule. The right to cancel your
original election and change to the maximum (75%) reduction
schedule for your Basic Life Insurance is transferred to the
assignee(s).
Your assignee(s) do(es) not have the right to cancel the
assignment, but may reassign the insurance coverage.
An assignment cancels any designation of beneficiary
you may have made. Only the assignee(s) may then designate
beneficiaries. Each assignee may designate anyone, including
himself or herself, as the beneficiary of the portion of your
life insurance the assignee owns. If the assignee does not
designate a beneficiary, he/she is the beneficiary. An assignee
may designate a contingent beneficiary and may change the
designation of beneficiary at any time. Each assignee is
responsible for keeping your personnel office or retirement
system advised of his or her current address.
You may obtain the assignment form, RI 76-10 Assignment of
Federal Employees'Group Life Insurance, from your employing
office or retirement system. Follow the directions on the form
carefully. If you list more than one assignee, you must specify
percentages for each. You cannot assign specific dollar amounts.
You cannot assign your insurance by the type of insurance (e.g.,
Basic to one person, Option A to another person, etc.).
You may wish to consult your tax attorney about the tax
implications of assigning your life insurance coverage.