Life insurance premiums can be treated as alimony in some circumstances. Ordinarily, life insurance proceed received by the ex-spouse are tax-free, even if used to provide a substitute for alimony upon the death of the payee spouse, unless alimony amounts are in arrears.

Temporary Regulation Section 1.71-1T Q&A 6 makes it clear that in order for the premiums to be considered alimony, the wife must be the owner of the policy. (IRS Publication 504 also supports this view.)

Ownership of the policy may be transferred tax-free to the ex-spouse under Section 1041. The cash surrender value of the policy is generally a marital asset.

SOURCE: DivorceSource