Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Life insurance is paid directly to the benefactresses of the life insurance policy. Generally most married couples use the marital deduction act to pass the proceeds and all other assets to the surviving spouse. If the proceeds remain with the surviving spouse, they are subject to federal and state estate taxation if the proceeds and all other assets exceed the federal unified credit and the state exemptions.
If that possibility exists, then the policy or policies should be owned day one by an Irrecoverable Life Insurance Trust to avoid inclusion in the estate.
Yes, life insurance is included in estate tax if the money is not passed to a surviving spouse, and the beneficiary is not an irrevocable life insurance trust. The amount of the estate that is over the exempt amount is subject to the federal and state estate taxes for that state.
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If that possibility exists, then the policy or policies should be owned day one by an Irrecoverable Life Insurance Trust to avoid inclusion in the estate.