Legal Question in Wills and Trusts in Wisconsin

Re: Life Insurance inheritance

This asks at least three questions:

1. Does the insurance policy death benefit pass through the probate process?

2. Is there any tax implication for the decedent�s estate?

3. What tax implications are there to sharing some of the death benefit with the decedent�s mother?

Quick answers:

1. The death benefit passes to you outside of the probate process, not as part of the estate but as fulfillment of an insurance contract. You will receive the death benefit free of taxes.

2. Whether the amount of the death benefit is included in your sister's estate for the purposes of calculating any federal estate tax liability will depend on how the policy was owned at the time of your sister's passing. If she owned the policy it will be counted in her estate. If it was held by an irrevocable trust it will be outside of her estate. Whether that question (owned by decedent or owned by someone other than the decedent at the time of her death?) has any importance will be determined by the size of the estate (other than the insurance death benefit) and the amount of the death benefit. If the two add up to less than $2M, and you have no other additions to the taxable estate, there is no Federal Estate Tax liability. If the sum is greater than $2M, Federal Estate taxes apply. [In this I am assuming that by "recently" you mean she died in 2007 or 2008.]

3. As far as giving some to your mother, you can gift up to $13,000 per year, per recipient with no tax implications.