1. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    As a general rule, the Death Benefit on a life insurance policy is not taxed. That is what makes purchasing life insurance advantageous. While life insurance death benefits are generally excluded from income tax to the beneficiary, they are included as part of the estate of the deceased if the deceased was the owner of the policy at the time of death. But unless you have a large estate generally you do not have to worry about estate taxes. There may also be some rare exceptions to this but in most cases there is no tax on a lump sum payout to the beneficiary.
    Answered on April 13, 2013
  2. 15786 POINTS
    Bob VineyardPRO
    Founder, Georgia Medicare Plans, Atlanta,GA
    Life insurance proceeds may be subject to state or federal inheritance taxes or estate taxes. There are ways to structure the ownership of your policy to minimize or eliminate state and federal inheritance taxes.

    If the proceeds are held by the carrier for months or longer, the proceeds will accumulate interest payments which are taxable to the beneficiary.
    Answered on April 30, 2013
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