should I not be the owner of my life insurance policy?

Question

I have read somewhere that if I own my life insurance policy - when I die the beneficiaries will have to pay taxes on the proceeds, because it is like a gift to them..

Answer 1

In the United States, death benefits are not gifts. It is an insurance claim and no one pays taxes on them. It is a morale issue and it wouldn't be right to put taxes on death claims.

However, if no one is named as a beneficiary, the death benefits will be paid to your estate and whoever wish to claim it, will pay taxes on it.

Answer 2

That is incorrect. The beneficiary will not have to pay taxes on the death benefit. You should ALWAYS be the owner of your life insurance policy. The reason is because the owner is the only one that can make changes to the policy. You would want to have that control, not give that control to someone else, right?

Answer 3

You may be misrecalling the details you read. Generally, insurance you purchase with your own money to insure your own life is not taxable income for your beneficiaries.

However, if someone else purchases a policy to insure their own life, then transfers ownership to you as "valuable consideration," then you will owe tax on the proceeds when that person dies. If you die during the ownership assignment period, your beneficiaries must pay this tax when the insured dies. Tax is due because this assignment of benefits represents income to you or your heirs.

Here's a link to the IRS web page regarding life insurance proceeds:

http://www.irs.gov/faqs/faq4-9.html

I hope this helps.

Answer 4

SO not true.

The owner of the policy is totally irrelevant - it's the BENEFICIARY that can incur taxes, IF the beneficiary is YOUR ESTATE. Then it becomes part of your estate, and subject to estate taxes.

If the beneficiary is a named person or persons, it's NOT part of your estate, so not subject to estate taxes.


The person who pays for the policy and takes it out is the policy owner. They get to name the beneficiary. The insured person gets to submit to blood tests, etc, and sign off on the application, but doesn't have any say in changing the beneficiary clause. Only the policy owner can do that.

Answer 5

The coverage term you're searching for for is 'assignor', no longer 'proprietor'. Regardless, he's the assignor of the coverage maximum appropriate now, and you are the assignee (or beneficiary). some life regulations enable him to pass the rights of his coverage (or assign the coverage), and a few do no longer, so which you will would desire to examine the coverage to ensure. If the coverage may be assigned to you, your coverage organization will require types to be crammed out to make it respected. as quickly as you grow to be assigned the coverage, you will would desire to complete new beneficiary types, etc. in case you determine your coverage may be assigned, i desire to advise chatting with the agent that bought you the coverage. despite in case you desire to try this or no longer is quite as much as you and your husband. How would you persuade your husband to assign you a life coverage in case you acquire divorced? If I have been getting divorced, i does not desire my ex-spouse to have insurable pastime in my life. frequently, you will purely desire to assign life reward in case you have been going to establish a believe fund or in case you have been terminally ill.

Answer 6

Contact your Agent of record on the policy. You need a review. Listen to Catz.

Answer 7

Just do up the trust form when you buy insurance. The agent will have the form for you to sign.