Anyone know if the tax applies to life insurance benefits?
Don't know about that, but you do have to pay taxes on SS payments...and SS payments taken out of your check is already a tax. TAX EVERYTHING!!!!!!!!
FMCDH(BITS)
Anyone know if the tax applies to life insurance benefits?
Life insurance policies are “owned” by someone. If you are the “insured” and the “owner” of the policy, the insurance proceeds will be included in the taxable assets of the estate that are subject to the estate tax, after the deduction of the current estate tax exemption amount.
To confirm the ownership of a policy, contact the life insurance company that issued the policy and ask them to confirm the ownership of the policy. Concurrent with that, check who the “beneficary” is - if the policy is several years old, the original beneficiary may not be whom you want to receive the proceeds at this time. If you are the “owner” of the policy, you can change the “beneficiary”.
If you own the policy and want it out of the taxable estate, you will have to make a gift of the policy to another “owner”, who will then have it included in their estate. If the cash value of the policy exceeds $13,000, you will then have to contend with the “gift” tax.
Good luck...
My state farm agent told me life insurance benefit is not taxed. In other words, when your beneficiary gets the money, they do not have to pay tax on it.
I should point out that the beneficiary should be a specific person or persons, not your estate. The person is paid immediately in a lump sum and it is not part of your estate.
Check with your agent or insurance company to be certain of your circumstances.