Tags
1099-INT, 3 Year Rule, Annual Exclusion, Beneficiaries, Beneficiary, Cash Value, Common Estates, decedent, Estate Taxes, Gift Taxes, Gross Estate, Installment Payouts, Interest Income, IRS, IRS Publication 525, Life Insurance, Life Insurance Policy, Life Insurance Policy Values, Life Insurance Premiums, Life Insurance Proceeds, Lump Sum Payouts, Policy Owner, Present Value, Surviving Spouses, Transfers, Trust, Valuable Consideration
In general, life insurance proceeds paid to a beneficiary are tax free. However, there are circumstances where the IRS will tax life insurance proceeds. Some of these circumstances include interest income received, estate taxes, and transfers. Therefore, in addition to listing beneficiaries properly on life insurance policies as discussed in the article The Need to Properly List Beneficiaries on a Life Insurance Policy, a policy owner must also understand the tax implications of their policy.