Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Life insurance death benefits paid to a beneficiary are not subject to personal income tax. If the policy is surrendered prior to death, the person receiving the proceeds is liable for income tax on any amount that exceeds the sum of the premiums paid. There are exceptions to these principles.
When it comes to Estate Planning sometimes people get confused with taxes an estate will have and using Life Insurance to pay for that tax. Life Insurance provides a tax free death benefit to the beneficiaries. One use of Life Insurance is to put into an Estate Plan to pay for any taxes due. This generally will only be the case on large estates however.
Licensed Life Agent, Life and Finance/ 50 States, New York
Life Insurance benefits are tax free. The death benefit is also available lump sum. There can also be payments arranged for income protection which are monthly for a specified number of years.
This form of payment Is beneficial for increased financial protection, for, all financial obligations may be paid like funeral, utility bills, support for family, etc.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What is the tax rate on life insurance payouts? In most all cases the life insurance payout tax is zero. Usually there is no tax consequence on life insurance proceeds presented upon death. The time that the benefit would have tax ramifications would be when the life insurance premium was taken on a pre tax basis. This would make the death benefit taxable income.
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This form of payment Is beneficial for increased financial protection, for, all financial obligations may be paid like funeral, utility bills, support for family, etc.