Life insurance is often used as a way of leveraging assets when transferring property to younger generations. Children, grandchildren, and great-grandchildren can all be recipients of life insurance proceeds. They can also be recipients of life insurance policies. Members of the younger generation may own life insurance policies and also be beneficiaries of the same policies. Parents or grandparents often pay the premiums on policies owned by their children or grandchildren with gifts that are small enough to qualify for the annual gift tax exclusion.

Intergenerational transfers, however, may be subject to generation-skipping taxes as well as to gift and estate taxes. Such asset transfers therefore often involve very sophisticated arrangements to deal with the many complex constraints of both federal and state laws. Improper planning can increase the potential tax liabilities significantly. In many cases the costs of poor planning could be many times the cost of expert tax advice.