Can I pay my daughters premiums if I am a beneficiary on her life policy?

First of all, there are many unknown variables to properly answer this question. In order to provide an appropriate response, we would need to know more about the situation. Additionally, if you are doing extensive estate planning or financial planning, you should consult a specialist, accountant and attorney in order to get solid advice.

In simple terms:

Yes, you most likely can pay your daughter's premiums even though you are a beneficiary on her policy - assuming that the premiums due on her policy are not any higher than the allotted annual gift tax exemption (around $13-$14,000). Speak with an accountant for details.

There are a few additional things to consider however: Who is the owner of this policy? If either you or your daughter are the owner, then this will not present any problems. The only problem that could occur is if you are the owner and a third person was listed as the beneficiary of the policy. Additionally, if a third person is listed as the owner, it would present a problem.

Deciding on whom to list as a beneficiary on a life insurance policy seems very simple, but in fact can create some unwanted taxable consequences. Few people (licensed agents included), are aware that if the owner, insured and beneficiary of a policy are three different people, the owner will be assumed - upon the insured's death, to have gifted the proceeds to the beneficiary. This is known as the Goodman Rule.