Legal Question in Tax Law in North Carolina

Re: do i have to pay inheritance taxes on burial insurance?

I'm NOT an expert in NC law..but it seems to me that burial insur. proceeds should not be subject to taxation on the Fed. or NC tax return. (I.E., no income tax on the insur. proceeds you received.) Just my educated guess....

Re: do i have to pay inheritance taxes on burial insurance?

I cannot speak for your state specifically without

a little bit of research, but ...

a) There is no federal income tax on proceeds of a

life insurance policy; if the beneficiaries don't

collect the proceeds quickly enough after the death,

and that money is invested temporarily by the insurance

company until they distribute it, the interest

actually earned for the beneficiaries is taxable to them

as of course it should be. But that's pretty short

money.

b) On federal estate taxes (death taxes, so to speak),

reasonable funeral and burial (as determined,

theoretically, by state law, but that's a tiny

technicality) ARE deductible. However, unless your

aunt was worth several hundreds of thousands of

dollars -- let's say, over half a million dollars

(assuming she hadn't already given away some great

portion of that amount during life), there probably

aren't any estate taxes to pay, federally, either.

(This is obviously so if she bought insurance to cover

funeral expenses; she didn't have anything else to

speak of.)

No state tax would apply if she were a Mass. resident, nor,

probably, in most states, but in NC, ... you'll need local

tax advice. Try an accountant!