 Life Insurance? |
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Puzzled | When I die and my husbands receives my life insurance.......? |
does Uncle Sam take part of the policy, or is it all my husband/children? |
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Suzanne: YPA
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Wow, there's a lot of conflicting information here. That's why I'm cutting and pasting my answer directly from the IRS web site:
"Generally, if you receive the proceeds under a life insurance contract because of the death of the insured person the benefits are not taxable income and do not have to be reported. Any interest you receive would be taxable and would need to be reported just like any other interest received.
However, if the policy was transferred to you for valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts. There are some exceptions to this rule. For additional information, call 1 800-829-1040."
In all likelihood, situation number two doesn't apply to you. However, as you can see, there ARE some circumstances where the amount you receive is taxable. Life insurers must pay interest from the date of death to the date the claim is paid, UNLESS the claim isn't filed timely. THAT IS FULLY TAXABLE. |
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Gatsby216
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For most people, no. Insurance proceeds are not taxable. And since the threshold for estate tax is 600k or more, the majority of estates do not pay taxes. |
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insuranceguytx
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If you or your hubby own the policy directly, then you will not pay taxes on the death benefit. If you purchased the policy through your employer, only the first $50,000 is tax free. You will pay tax on the remaining benefits.
Go meet with a good financial advisor and ask many "what if" questions like "what if I die, how much money will my husband receive?" and "what if I become sick and can't work, how long will it take to receive Social Security benefits?"
good Luck
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RAJENDRA J
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NO , |
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mbrcatz
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If he is the named beneficiary, then it is NOT part of your estate, and not taxable as part of your estate.
You should be asking your AGENT this question!!! |
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sig
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No if he is the beneficiary. Thats one good benefit to life insurance |
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aaron p
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People, how can we get this answer wrong? Do your clients a favor and go back to school before you sell another policy. I have seen scarily few answers that are sufficient.
Life insurance death benefits are not subject to INCOME tax with a properly named beneficiary (like your husband), however it is counted in the estate of the owner for ESTATE tax valuation purposes. Most Americans are not subject to estate taxes, but if you are not sure that you are "most Americans", you should see a lawyer. There are basic strategies such as having a trust own the life policy, having your children own the policy, or creating a spousal by-pass trust (sometimes called an A B trust) that a competent professional can walk you through. |
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Dave1001
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There are actually two parts to the question. First off, all life insurance proceeds are tax-free. End of discussion.
The second part of the equation is estate taxation. This gets a bit trickier. Generally, if your estate is below a certain threshold, the tax implications are not that high. If the value of the estate goes over 1.2 million, you're in a deep doo-doo situation tax-wise. (I've forgotten the actual dollar amount, but it's somewhere around there.)
If you're in this situation, set up a living trust with an attorney who actually knows what he's doing. Don't rely on Uncle Joe who found a computer disc at Staples that tells how to do a living trust. Get an attorney. It is well worth the $$ spent to make sure it's done right.
Hopefully that's useful information for you. I hope that you are in good health and this discussion will be academic for many years to come! |
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Melissa
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At the time of your death, if your husband is named specifically as beneficiary, then no. If it's paid to your estate, then yes. However, if your husband were to have later legal issues (like creditor issues or a future divorce with splitting of assets, etc) then the money can be split by the courts that way. Don't name minor children as beneficiary - insurance companies cannot write checks to minors.
You might consider setting up a legal trust (I did it with a local attorney for less than $250) if you are concerned about how the money will be distributed. The trust is a legal document that names exactly how the money is to be used (monthly income for husband, children's education, etc) and the money is paid by the trustee each month or year as specified. The trust is protected by the courts and cannot be touched by creditors or other means. Your husband can be the trustee so he can access the funds or you can choose a trusted friend or an attorney. Once the trust is established, then you name the trust (with it's assigned tax id number) as your beneficiary. |
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Jim C
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As long as you are not paying for the policy with pre-tax dollars, or writing off life insurance premiums at the end of the year, (the latter is illegal, by the way) or if the death benefit would push your estate's assets over $600,000, the benefit is not taxable. This does not apply if you draw from the benefit while you're still living, though. (If you have a terminal illness or Long Term Care rider on your policy.) |
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DS
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Yes your estate is taxable unless you have paid the taxes on the estate yourself or had the probate court to remove the taxes before distribution to husband and children. |
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mister ed
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life insurance benefits are tax free. over and out |
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