Life Insurance Proceeds

LIFE INSURANCE PROCEEDS 

Generally Tax Free but Taxable depending on the circumstances.

DEATH: Life insurance proceeds paid to the beneficiary by reason of the death of the insured are not taxable income on the beneficiary's personal income tax return and do not have to be reported.

But.

If the owner cancels or surrenders the policy and receives the cash surrender value, the owner must recognize gain (net amount received less the cost or cost basis of the policy) as taxable income.

If the beneficiary receives the insurance proceeds in payment of an amount due from the decedent, the amount is paid by reason of the liability rather than by reason of death and thus the proceeds are taxable income.

If the policy has been transferred for valuable consideration, the proceeds are includible in the taxable income of the buyer transferree to the extent the insurance proceeds received exceed the amount paid for the policy by the buyer transferree plus any subsequent premiums paid (the buyer transferree's adjusted cost basis).

Investment earnings arising from the reinvestment of life insurance proceeds are taxable income, unless the investment earings are tax-exempt income by law.

CALL NOW 561-746-1926 or 561-339-8102 if you have any questions or concerns or would like to schedule a FREE, Confidential, No-Obligation Tax-Saving Consultation.