How do inheritance tax laws apply to insurance policies?

Answer by  Taxmatters (169)

Life insurance is generally not taxable to the beneficiary. Any taxes due would be reported through the estate return of the deceased, if applicable, and the estate would handle any tax obligation. You do not have to report the insurance proceeds on your return to the IRS or state where you live.

Answer by  Att4372 (1704)

Generally, life insurance is not subject to inheritance or income tax, provided non-business related parties are the beneficiaries. If an estate receives funds from a non-life policy, estate rules apply.

Answer by  Att4372 (1704)

In common cases, a personal life insurance policy is paid to the beneficary upon death of the policyholder and is not subject to income tax or estate tax. An annuity (which is an insurance policy) is an asset which might be part of an estate and taxable.

Answer by  patti (29325)

Death benefits paid to the estate and then distributed as inheritance are subject to inheritance taxes. The executor of the estate and/or the attorney can give you more details about the taxes, if they were paid, etc.

Answer by  mediajunkie (592)

No. Insurance benefits are not paid to the deceased and hence not part of their estate. However insurance payouts are considered part of the beneficiary's income and hence subject to regular tax rates.

Answer by  tamarawilhite (17883)

No, a life insurance policy is income tax and inheritance tax free - as long as the policy was bought with post tax money and paid for by the life insurance policy purchaser.