2006-09-11 11:04:54 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
When a person insured by a life insurance policy dies during the term of the policy the proceeds are paid to the beneficiary or beneficiaries.
Life insurance death benefit proceeds are usually not subject to state and federal income taxation. But, if there is no beneficiary, the death benefit proceeds of the life insurance policy may be included in the estate of the deceased. Then, it may be subject to state, federal and inheritance taxes.
Also, the proceeds may be subject to federal estate taxation.
If you own all or part of the life insurance policy at the time of your death, the proceeds may be included in your gross estate for federal estate tax purposes.
Also, federal gift taxes and state inheritance taxes may apply to life insurance policy proceeds under certain circumstances.
You may want to consult a tax advisor regarding your questions about any estate, income and gift taxes related to any life insurance policies you own or are considering buying.
Also, your insurance agent should be able to tell you if your life insurance policy benefits will be taxable.
Finally, different taxes may apply to the benefits paid by your life insurance policy if the death benefit is paid to the beneficiary in installments, instead of as a lump sum. The interest portion, if any, of each installment is usually treated as taxable to the beneficiary at ordinary income tax rates, while the remaining principal portion is tax-free.
I hope that helps! Take care and best of luck!
2006-09-12 02:34:12 · answer #1 · answered by Anonymous · 2⤊ 0⤋
Life Insurance Death Benefit is 100% Tax Free to the Beneficiaries.
The value of the Death Benefit is included in the estate of the owner/insured for the estate Tax calculation. Unless it was set up properly in a irrevocable trust where the trust is applicant, owner, payer of the policy.
The actual funds avoid probate and get paid directly to the named beneficiaries 100% tax free.
2006-09-12 09:47:58 · answer #2 · answered by Joe the Expert 2 · 3⤊ 0⤋
The beneficiary on a life insurance policy does not have to pay tax on receipt of the death benefit.
2006-09-12 01:48:03 · answer #3 · answered by Adios 5 · 2⤊ 0⤋
Get insurance quotes
2014-12-28 12:56:16 · answer #4 · answered by Anonymous · 0⤊ 0⤋
This is a good question, and one that confused me for a long time.
2016-08-23 06:37:09 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Not sure what to say
2016-07-27 12:32:36 · answer #6 · answered by Anonymous · 0⤊ 0⤋
no
2006-09-11 11:08:06 · answer #7 · answered by John H 4 · 2⤊ 0⤋