2007-02-20 09:50:31 · 7 answers · asked by fred w 1 in Business & Finance ➔ Insurance
If you own a life insurance policy, or name either yourself or your estate as beneficiary, the policy death benefit will increase the size of your estate. If you think that you will have a federal-estate-taxable estate (that is, large enough) an insurance policy on your life is usually best owned by someone else. You can establish an irrevocable trust to be the owner and beneficiary of your life insurance policy. Alternatively, you might have your adult children own, and be beneficiaries of, the policy. Either will avoid inclusion of policy proceeds in your estate. It is also important to name contingent beneficiaries in case someone dies and the proceeds end up in your estate anyway. Dealing with life insurance proceeds is part of estate planning and the subject should be dealt with especially if you will leave a large, taxable estate.
Here's one ins. company's discussion as an example.
http://www.pacificlife.com/Channel/Educational+Information/Life+Insurance+Concepts/Maximizing+Life+Insurance+Benefits.htm
2007-02-20 10:09:11 · answer #1 · answered by Kraftee 7 · 1⤊ 0⤋
Life insurance benefits are always income tax free, but not necessarily estate tax free. As others have mentioned, if the insured is also the owner of the policy, then the proceeds are part of the insureds estate even if there is a designated beneficiary. This is why my siblings and I are all the owners of policies on my parents. They gift the premiums to us once a year and we pay the insurance co. The result is that the proceeds will not be subject to estate taxes.
2007-02-20 11:02:37 · answer #2 · answered by Icey12 2 · 0⤊ 1⤋
They do with Federal Estate tax, you will have to check with state, and as long as they are not made payable to the estate. If they pass to beneificiares there is no tax. If they pass to the "estate" there is tax (but only if over the exemption limit -- which changes every year).
A bit confusing. Talk to a financial planner or attorney for a better answer
2007-02-20 09:54:39 · answer #3 · answered by Anonymous · 0⤊ 0⤋
My question to you is why do you have so many policies? You end up paying more that way. Your insurance company is required to ask you if you have other life insurance policies or if your replacing one with another. Depending on your age and health you might want to look at combing some policies into one. But someone with an insurance license would need to look at if that is a good idea or not. It may depend on how long you have had the policies ( if you had the policies a long time it may be a bad idea) or what kind of policies you have. You need to sit down with an insurance agent that is honest and can review your policies.
2016-05-23 23:49:42 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Life insurance with cash value don't pay out cash value when you die! Sure you get face amount that is reduced by any loans and missed premiums, but you lose all the cash value! They say its a good way to build savings! How is that so if you lose it all and it doesn't go to anyone when you die? People say you can borrow it. Why do I want to borrow my own money that I paid for? Cash value = scams!
2007-02-21 11:21:19 · answer #5 · answered by Anonymous · 0⤊ 0⤋
If the benefits are paid to the estate, they become PART of the estate, and are then taxable.
2007-02-20 12:37:05 · answer #6 · answered by Anonymous 7 · 0⤊ 0⤋
I certainly hope so we just buried my dad and divided the insurance and the proceeds from the house--small town court house helped.
2007-02-20 09:54:59 · answer #7 · answered by dtwladyhawk 6 · 0⤊ 0⤋