Valuation of policy gift is the process of determining the appropriate value to report for gift tax purposes when a life insurance policy is transferred, typically to an individual or irrevocable trust. Depending on whether the policy is newly issued, in force with cash value, or a term policy, valuation may rely on rules outlined in IRS Revenue Procedures and Regulations, such as interpolated terminal reserve plus unearned premium, replacement cost, or other prescribed methods. Accurate valuation ensures that gift tax returns reflect the true economic value of the policy and that lifetime exemption usage and potential tax liabilities are properly tracked. Misvaluation can lead to underreported gifts or disputes with the IRS.

Advisors address valuation of policy gift when clients transfer existing policies into irrevocable life insurance trusts, make intrafamily policy gifts, or restructure ownership for estate planning reasons. They coordinate with carriers to obtain Form 712 or similar statements showing the IRS-accepted value and with CPAs to report gifts on Form 709. In complex cases, actuaries or valuation specialists may be consulted. Advisors explain to clients that policy gift valuation affects how much of their lifetime exemption is consumed and may influence decisions about which policies to gift versus surrender or replace. Understanding valuation of policy gift helps advisors support accurate tax reporting and compliant, tax-efficient ownership transitions.