1. 3485 POINTS
    J Scott BurkePRO
    President, Newbury Inc., Evansville, Indiana
    The death benefit from life insurance is usually paid out tax free if it is paid directly to the beneficiary(s). If it goes through the estate (no human beneficiary named) it will usually be taxed.

    If you are planning a larger estate, you will want to involve an estate planning attorney, a life insurance agent and a CPA as your advisory team. There are certain situations where you may be taxed if you do not plan well.

    A big advantage of whole-life insurance is that you can also use it for tax free income before you die. Life insurance is one of the most tax favorable money management tools you have available.
    Answered on April 10, 2013
  2. 0 POINTS
    David RacichPRO
    Fountain Hills, Arizona
    Assuming that payout is death benefit proceeds, those generally pass to their designated beneficiary’s tax free. There are some business scenarios where death benefit proceeds are subject to the alternative minimum tax as a preference time and could be included as revenue at ordinary income tax rates. There may be estate taxation on the federal and/or state level.
     
    Assuming that payout is about distributions:  If the life insurance policy is a modified endowment contract, loans are taxable. If the life insurance is a non-modified endowment contract and the policy lapses, is surrendered or the policy reaches its maturity date…all policy loans, (those received and internal) are ordinary income tax events is the year they occur.
    Answered on May 27, 2013
  3. Did you find these answers helpful?
    Yes
    No
    Go!

Add Your Answer To This Question

You must be logged in to add your answer.


<< Previous Question
Questions Home
Next Question >>