It can be depending on the situation. In most cases if the proceeds are left to a named beneficiary then there are no estate issues. But there are exceptions to this. For example; If a person is receiving Medicaid assistance for Long Term Care the cash value of a life insurance policy or in some States, the face amount will create issues as far as qualifying for benefits. If there was an undisclosed life insurance policy owned by the Medicaid recipient then the life insurance proceeds can be attached as part of the estate during Medicaid Recovery. Another exception may include large estates. For the average person there is no problem however, unless you have to deal with the Medicaid issues. If you have a large estate or your health is deteriorating and some type of long term care is imminent then seek out an elder law attorney or care resource planner for advice.
Life insurance proceeds are considered part of the estate after death, and estate taxes generally must be paid if the policyowner's estate surpasses the exempt limit, and his/her spouse has predeceased him/her.
While alive, only the cash value of life insurance is considered an asset for tax purposes.
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While alive, only the cash value of life insurance is considered an asset for tax purposes.