The proceeds from life insurance policies can make a big difference for the loved ones that you will be leaving behind. There are some tax questions that arise around life insurance proceeds, and we would like to provide some answers here.
If I was to be named beneficiary of an insurance policy, when I receive the proceeds will this influx of money be taxable?
Generally speaking life insurance proceeds are not going to be subject to income taxes. The best way to be certain based on the circumstances in question would be to consult with an estate planning attorney and/or a tax accountant.
I was talking to someone who told me that probate was a time-consuming legal process. He said that I won’t receive my inheritance until my father’s estate has been probated.
I am the beneficiary of his life insurance policies. Does this mean that I won’t receive the proceeds until after probate?
Insurance policy proceeds will pass to the beneficiaries outside of the probate process. You will not have to wait until the estate has been probated to receive your proceeds if you are the beneficiary.
Are the proceeds that would be going to the beneficiaries of my life insurance policies considered to be part of my taxable estate by the Internal Revenue Service?
The answer to this question is yes, these proceeds would be subject to the federal estate tax. This is assuming that the overall value of your estate exceeds the amount of the estate tax exclusion, which currently sits at $5.25 million.