Should the plaintiff name specific individuals as beneficiaries and reserve the right to change the beneficiaries?
The safest and most conservative approach is one where the plaintiff does not retain any right to name or to change any beneficiary. It might suggest constructive ownership. Although the life companies permit this to be done, Creative Capital prefers to follow Revenue Ruling 79-220 to the letter. This ruling provides that no adverse tax consequences will result when the plaintiff’s estate is the beneficiary. A Private Letter Ruling (PLR No. 8426078) allows a plaintiff to name a natural person as beneficiary without adverse tax consequences. However, only the Revenue Ruling is binding on the I.R.S. The Private Letter Ruling is not. Therefore, the safer and more conservative approach is to name the plaintiff’s estate as beneficiary. Notwithstanding the foregoing, once advised of the above, the plaintiff is free to make his/her own decision.
