Is Life Insurance Settlement Taxable Income?
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63333 POINTSview profilePeggy MaceMost of the U.S.When you are the beneficiary of a life insurance settlement, it is usually not taxable income. If the insurance settlement was left to the estate of the Insured, it is subject to income tax. And either way, if the amount pushes the value of the estate over the exempted amount, estate taxes will need to be paid on the amount above the exempted amount (federal estate tax is charged on estates over 5.25.M in 2013).Answered on October 16, 2013flag this answer
37376 POINTSview profileDavid G. Pipes, CLU®, RICP®Business Development Officer, T.D. McNeil Insurance Services, Fresno, CaliforniaThe settlement when made to an individual does not constitute a taxable event. When the proceeds are paid to anyone else it could be taxed. This income tax free feature can be crucial in planning your estate. For example, if you can identify your eleven grandchildren and purchase a single premium whole life policy on yourself naming them as beneficiary, you can take care of their needs in your estate without triggering any income tax consequences.Answered on June 30, 2014flag this answer
21750 POINTSview profileJim WinklerCEO/Owner, Winkler Financial Group, Houston, TexasThat is a great question! One of the main reasons to purchase a life insurance policy is the tax free benefit that is received by your named beneficiaries. If you've named beneficiaries on your policy, as a rule, the benefit will not be taxed. There can be tax issues if no beneficiary has been named (or they've passed) and the payment goes into the deceased's estate, especially if that estate is a sizeable one. Thanks for asking!Answered on July 1, 2014flag this answer
11783 POINTSContact Meview profileLarry GilmorePROAgent Owner, Gilmore Insurance Services, Marysville, Washington StateIs a life insurance settlement a taxable event? Well the answer is depends. Normally life insurance premiums are paid with after tax dollars so based on IRS code the benefit paid is considered tax free. That said, some retirement plans can use life insurance and likewise in some business applications and write off the premium, which then makes the benefit taxable income when taken.Answered on October 9, 2015+01+1 this answer
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