My father died recently and he and my mother had life insurance which pays out on the first death. My mother, my sister and I are named beneficiaries. Do we have to pay tax on the settlement. It'll be about £20,000
2007-09-27 07:53:42 · 5 answers · asked by mazlester 2 in Business & Finance ➔ Insurance
The simple answer is that benefits paid out under an insurance policy are NOT liable for taxation UNLESS the benefit is paid out for more than a year. The benefit does not count as 'income', 'capital gains' or whatever.
Similarly if you won the lottery - that would be tax-free.
The exception is a pension - where part of the income is treated as return of capital (exempt) and part as return on investment (taxable)
2007-09-27 10:22:28 · answer #1 · answered by welcome news 6 · 0⤊ 0⤋
It is unlikely that your sister and you will have to pay taxes.
Your mother on the other hand might be stuck with some if she's not careful. The money must clearly state that it is going to her as seperate from his estate.
If insurance is paid to the deceased estate, then estate tax applies (atleast in the USA).
It's unlikely she'll have to pay taxes, but make sure the the Insurance company and the lawyer don't cut the check to the estate, only to her. I'd then suggest she put it into an new account that only has her name on it.
Just becareful with it and she'll be fine.
2007-09-27 16:11:09 · answer #2 · answered by saberhilt 4 · 0⤊ 0⤋
No. Most life assurance policies in this country have reasonable tax breaks, one of which is that the policy is usually written in trust for the named beneficiaries so it doesn't fall into the estate of the life insured (no inheritance tax). As tax is deemed to have been paid on whatever investment gains have arisen on the policy, the beneficiaries are not usually subject to any further taxes either.
2007-09-27 15:15:09 · answer #3 · answered by Ellis 6 · 0⤊ 0⤋
laws in Britain (you said payout was in GBP) could be different than in USA. Here there are NO taxes on life insurance payouts. Contact the insurance company. If there is a tax due, they must give you a document showing the taxable portion they reported to the Revenue authorities, and amounts withheld, if any.
2007-09-27 14:59:25 · answer #4 · answered by Mike 7 · 1⤊ 0⤋
Sssshhhh!!! Gordon Brown missed that one!
2007-09-27 15:03:57 · answer #5 · answered by Tallboy 4 · 0⤊ 0⤋