is life insurance taxable at payout time.?

Question

So if I die and my husband collects the $, is that $ taxable?

Answer 1

Only if the policy is a modified endowment contract. If not, then no income taxes will be charged on the death claim.

However, if your husband dies before you do and then you die, the death claim will be paid toward his estate. Then estate taxes will apply upon any family member that claims the money.

Answer 2

In most cases the answer is no.

Becarefull though because if the policy is a cash value life insurance policy, such as a whole life, universal, or variable universal life insurance policy it can become what is known as an Modifide Endowment Contract (MEC for short) and if that happens then a portion of the payout can be taxed as ordinary income. This is very rare and is most common with Single Premium contracts. The place to look is in the illustration that came with your policy you can look for any notations in the fine print that would indicate if and when the policy becomes a MEC.

Also if your employer is paying the premiums, make sure they are not deducting the premiums on their tax returns, becuase if they are... and IRS catches them on that, your spouse will more than likely be paying taxes on the payout.

Then there are the Estate Tax questions, Generally the best thing to do here is to rather have your spouse be the beneficiary have a living trust be the beneficiary and that will elivate a lot of headaches. Consult a qualifed Estate Planner along with an life agent who does a lot of estate planning. They will be able to design a comprehensive plan for you that will not only help transfer you estate as you desire but can add the liquidity needed to pay any and all estate taxes.

Answer 3

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! Best of luck to you and your husband.

Answer 4

Generally not taxable. There are exceptions.

Why not work with an agent or financial planner who can guide you through this and all the other questions that arise?

You rely on a message board for answers to these critical questions yet no one on here MUST provide an accurate answer. No one here knows all of the details of your life, your financial situation or your particular policy.

Answer 5

Income taxes- No

Estate Taxes
Depends on the ownership of the policy and how your bank accounts are set up. If you do not own the policy (your husband is the owner) then you will not have to worry about estate taxes. if you own the policy and the money is paid into a bank account without joint ownership, then it can be rolled into consideration of the estate taxes if the estate is large enough (like 1 or 2 million dollars).

Believe it or not, it is best not to own your own life insurance, but you can help them pay it.

Answer 6

Depends. If he's the beneficiary, then no. If your ESTATE is the beneficiary, well, it depends on where you live. If your ESTATE is the beneficiary, the life insurance payout becomes part of your estate, and subject to any estate taxes that your estate has to pay, BEFORE your heirs can get anything.

Answer 7

Are you the beneficiary. Or is the estate the beneficiary?
If you are the beneficiary and all is in order, you could have the $$$ in two weeks.
If the estate is the beneficiary, you'll wait for a year if you're lucky.

Answer 8

Insurance payout is excluded from the Esate duty.

Answer 9

http://mylifenet.com/

Answer 10

No