The first $50,000 of proceeds of any life or accident insurance policy, as to which the insured until his death retained the legal incidents of ownership (as, for example, the right to change the beneficiary, the right to surrender, cancel, or assign the policy, the right to pledge the policy for a loan, or the right to obtain from the insurer a loan against the surrender value of the policy), which are payable on the death of the insured to a beneficiary other than the insured's estate, executor, or administrator, and which are not receivable by or for the benefit of the insured's estate, are exempt from the Inheritance Tax Law, any excess over $50,000 being subject thereto. Whether the insured has more than one such policy or names more than one beneficiary therein, only $50,000 of the aggregate proceeds are exempt. If more than one beneficiary is named in one or several policies, the total amount of the exempt proceeds is prorated among the several beneficiaries in proportion to the amount of insurance payable to each. For example, if a decedent leaves life insurance to A in the amount of $10,000, to B in the amount of $40,000, and to C in the amount of $50,000, the beneficiaries should be entitled to the following exemptions: A, $5,000; B, $20,000; C, $25,000.

All proceeds of any policy similar to the type mentioned in the preceding paragraph, as to which the insured at his death had none of the legal incidents of ownership, are exempt from the law, unless the insured during his lifetime had assigned or transferred the policy in conformity with Revenue and Taxation Code Section 13641 in contemplation of death, in which case only $50,000 of the proceeds are exempt.

Note: As to valuation of insurance, see Section 13951.9.

As to taxation of annuity contracts, see Sections 13644.1, 13648 and 13648.1.

As to withholding and notice requirements prior to delivery of insurance proceeds by insurance companies and issuance of consents to deliver such proceeds, see Sections 14345 and 14345.1.

Note: Reference: Section 13723, Revenue and Taxation Code.