Payment of life insurance premiums by a third party

If a third party assumes the contributions for a life insurance policy, the contributions are subject to gift tax in the full amount, not only in the amount of the increase in value of the insurance claim.

If a third party pays the premiums for a life insurance policy, this results in a taxable gift as soon as the relevant tax-free amounts are exceeded. However, the Federal Fiscal Court (Bundesfinanzhof) has now had to decide whether the premiums themselves or only the lower increase in the value of the insurance claim should be recognized and has come to the conclusion that the premiums should be recognized in full. The decisive factor is that in this case there is no indirect gift of the insurance claim, but rather a direct gift by way of settlement of the payment obligation for the premiums.