Legal Question in Wills and Trusts in Virginia
My husband is listed as the beneficiary of one of his father's life insurance policies but not the personal representative to the estate. (He has 3 sisters who are not listed on the policy) Do you have to let the representative know if you received a payout on a life insurance policy? Can he divide what he have received from the payout amongst his sisters if he wants (to including the personal representative) and let them use it for whatever they want before probate of the estate has ended or do you have to wait until probate is over? Do you have to claim this on your taxes or will a tax return have to be done next year for the part of the year that the deceased was alive and include this payout on that? We live in Virginia and the deceased (his father) lived with his girlfriend (personal representative) in South Carolina. Thank you.
1 Answer from Attorneys
The death benefit proceeds under a life insurance policy payable to a named beneficiary in the policy typically pass outside of the probate process and this beneficiary is free to do with such a payout as he or she chooses without having to give an accounting to the executor of the decedent's estate.
Such death benefit proceeds would normally not be taxable to the beneficiary if they are paid out in a lump sum equal to the amount of the life insurance coverage of the particular policy involved.
Tax returns would need to be prepared and filed in behalf of the decedent for any portion of the tax year in which he was alive and had received reportable income, but in any event would not include as taxable income any portion of life insurance proceeds paid to a beneficiary as a death benefit.
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