Life Insurance Taxable?
My sister died, had life insurance she wanted divided between husband,daughters and sister. Benificary listed as husband. If he splits insurance, are other subject to tax of money?
2 Answers from Attorneys
Re: Life Insurance Taxable?
ACTUALLY THE ESTATE TAX IS ON THE ESTATE EXCEPT THERE COULD BE A TAX APPORTIONMENT CLAUSE WHICH WOULD APPORTION THE TAX AGAINST ASSETS THAT PASS OUTSIDE OF PROBATE. WHEN IT GOES TO A SURVIVING SPOUSE THERE IS NO TAX BECAUSE OF A MARITAL DEDUCTION. BECAUSE THERE IS A NAMED BENEFICIARY THE INSURANCE COMPANY WILL ONLY PAY TO THAT PERSON UNLESS HE EXECUTES A QUALIFIED DISCLAIMER FOR ALL OR PART OF IT. THAT MIGHT CAUSE SOME ESTATE TAXATION IF THE ESTATE IS OVER 650,000. IF THERE IS A GIFT OF THE PROCEEDS AFTER RECEIPT THEN THERE IS NO ESTTATE TAX ON THE PROCEEDS, BUT ANY GIFT IN EXCESS OF THE $10,000 ANNUAL EXCLUSION PER DONEE WILL USE UP PART OF THE HUBANDS UNIFIED CREDIT WHICH MAY CAUSE TAXATION AT HIS DEATH. I SUGGEST YOU VISIT WITH AN ESTATE PLANNER TO RUN THE NUMBERS.
Re: Life Insurance Taxable?
In general, the short answer to your question is probably "Yes". There are exceptions to this general rule. It would be wise to consult with a tax expert before taking any steps, however.
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