## Facts

- Marshal L. Noel purchased two round-trip flight accident insurance policies at an airport shortly before boarding a flight to Venezuela.
- The policies totaled $125,000 in death benefits and named Noel’s wife as beneficiary.
- Mrs. Noel testified that she paid the $2.50 premium for each policy and that Noel instructed the clerk to give the policies to her, stating he no longer had anything to do with them.
- The policies were delivered to Mrs. Noel, who retained physical possession.
- Less than three hours later, Noel died when the plane crashed into the Atlantic Ocean.
- The insurers paid Mrs. Noel $125,000; the executors did not report the proceeds on the federal estate tax return.
- The Commissioner determined the proceeds were includable in the gross estate under 26 U.S.C. § 2042(2) because they were “insurance under policies on the life of the decedent” and Noel possessed “incidents of ownership” at death, including the rights to assign the policies and change the beneficiary.

## Issues

1. Whether flight accident insurance payable only upon accidental death in flight constitutes “insurance under policies on the life of the decedent” under 26 U.S.C. § 2042(2).
2. Whether the decedent “possessed at his death” incidents of ownership in the policies, despite handing the policies to his wife and stating they were hers.

## Decision

- The Supreme Court reversed the court of appeals and reinstated inclusion of the $125,000 proceeds in the gross estate.
- Flight accident policies payable upon the insured’s death are “policies on the life of the decedent” for purposes of § 2042(2).
- Noel possessed incidents of ownership at death because the policies reserved to him the power to assign and to change the beneficiary.
- Incidents of ownership exist for estate-tax purposes without regard to the decedent’s practical ability to exercise the rights at the moment of death.

## Legal Principles

- Under IRC § 2042(2), insurance proceeds payable to a beneficiary other than the executor are includable in the gross estate if (i) the insurance is under policies “on the life of the decedent” and (ii) the decedent possessed any incidents of ownership in the policies at death.
- Accident or flight insurance that pays upon the insured’s death falls within “policies on the life of the decedent,” consistent with long-standing administrative interpretation treated as having legal effect where Congress substantially reenacts the statute without change.
- “Incidents of ownership” include legal powers such as the right to assign the policy or change the beneficiary.
- Informal statements, physical delivery, or the accidental nature of the covered risk do not negate incidents of ownership where the decedent retains legally enforceable control under the policy at death.

## Conclusion

The Court held that flight accident insurance paying upon the insured’s death is “insurance under policies on the life of the decedent” and that retained legal powers to assign the policy or change the beneficiary are incidents of ownership, requiring inclusion of the proceeds in the gross estate under § 2042(2).


Comm’r v. Est. of Noel, 380 U.S. 678 (1965)