March 27, 2013

Do you pay federal taxes on life insurance? Exceptions?

10 thoughts on “March 27, 2013”

  1. Katherine Graham says:

    No; life insurance proceeds are not taxed.

  2. Katherine Graham says:

    Yes, the exception is if the insurance is in your name and the beneficiary is not your spouse. If this is the case, you may want to consult with a tax attorney. Your attorney may suggest that you establish an irrevocable life insurance trust.

  3. Katherine Graham says:

    I’m pretty sure there are other exceptions to the rule, but am not sure exactly what they are.

  4. Mike Finley says:

    I made this question a bit vague on purpose. I had to chuckle as you worked through it in your mind, Katherine. Let’s start with receiving the payout from a life insurance policy when a loved one dies. The beneficiary in almost all cases would pay no federal income tax. (I am not aware of any States who tax life insurance payouts, but be mindful of the possibility.) The few exceptions could be large estates where the payout is combined with other assets which cause the estate tax to come into play. This will not apply to most people. The biggest problem I see is how poorly people manage the money once they receive a large lump sum payment. If you receive a payout of $100,000 or more you had better know what to do with that money BEFORE you receive it. Otherwise, you won’t have it long! We need to teach our loved ones what to do with large payouts. This is the part of life insurance that is rarely discussed. Sadly, to the detriment of the people left behind.

    You will pay tax on receiving cash value insurance policies that have been “invested” over long periods of time (no one dies). The parenthesis is my way of challenging this type of investment vehicle. High commissions and fees make this a very poor investment, but over long periods of time you will eventually earn some money. Once you make more money than you have paid in and you receive those proceeds, then you will pay federal and state income tax on your earnings. Don’t worry, it won’t be much.

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  9. Cristian says:

    I believe my plan from prssreogive runs in 6 month increments.Just get a plan where you pay monthly, and cancel it when you will no longer use it.BTW a lot of people do it but in most states you can get in a LOT of legal trouble if you are caught even lose your license. Even if you aren’t required by the state to have insurance, if you do get in an accident the other person could sue you for damages. So your parents are doing you a favor! [url=]tdwrrg[/url] [link=]eefzkvsuxp[/link]

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  19. Ram says:

    you do realize in order to keep his priosme that they would not go out of Business he just gave them 58 million more customers and if not the IRS will attach your refund and or fine you,where did I get the 58 mill you ask? you forget that he is fix en to give amnesty to immigrants unless of course the republicans did in their heels on it,what with all the violence in mexico right now and dead arizona man

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