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Started By
Message
Life Insurance Money
Posted on 8/1/14 at 9:55 am
Posted on 8/1/14 at 9:55 am
(no message)
This post was edited on 6/11/15 at 9:25 am
3
Posted on 8/1/14 at 9:59 am to TigerSaint1
Subject to estate tax only. For the vast majority of people, this would fall under the excluded amount of $5mil per person, or $10mil per married couple. Thus, generally no tax at all.
Posted on 8/1/14 at 1:07 pm to lsujro
quote:
Subject to estate tax only.
No its not. When planned properly, life insurance proceeds are completely non-taxable.
Posted on 8/1/14 at 1:19 pm to Bear Is Dead
If you have them in a trust or something, yes.
If not, it goes in your general estate for estate tax purposes.
If not, it goes in your general estate for estate tax purposes.
Posted on 8/1/14 at 1:44 pm to Bear Is Dead
quote:if planned properly, you can avoid taxes altogether in most cases. but under normal circumstances, yes, they are most certainly subject to estate taxation if you are over the exclusion amount. don't spout of BS you don't know about.
No its not. When planned properly, life insurance proceeds are completely non-taxable
Posted on 8/1/14 at 1:49 pm to TigerSaint1
The face amount is generally not taxable. However, there could be interest paid on the claim (depending on the timing of the filed paperwork) and/or dividends which could be taxable.
Posted on 8/1/14 at 1:52 pm to Dr Rosenrosen
quote:
While life insurance death benefits are generally excluded from income tax to the beneficiary, they are included as part of the estate of the deceased if the deceased was the owner of the policy at the time of death. This inclusion as part of the estate may subject the benefit paid to estate taxes both at the federal and state levels.
LINK
Link goes into how you can avoid it being part of your estate, but it is not common for the general population (nor is it necessary - not many married couples w/ assets >$10 mil).
Posted on 8/1/14 at 2:07 pm to TigerSaint1
Lord, the comments here.
Face value of personal owned, personal paid, life insurance paid out after a death is always free from income tax.
For the very select few in this country that have what would amount to a taxable estate, yes, life insurance proceeds, if they are in the estate, would be taxable as estate tax.
I have worked with a lot of estate tax returns, and I've never seen a single one have to pay tax on life insurance proceeds. Why? Because if you are in a situation where you have a taxable estate, you have absolutely done a decent amount of planning for it while you are alive, which includes planning that makes life insurance money not subject to an estate tax.
Suffice it to say that if someone is asking for this type of advice on this message board, they don't have a taxable estate.
Face value of personal owned, personal paid, life insurance paid out after a death is always free from income tax.
For the very select few in this country that have what would amount to a taxable estate, yes, life insurance proceeds, if they are in the estate, would be taxable as estate tax.
I have worked with a lot of estate tax returns, and I've never seen a single one have to pay tax on life insurance proceeds. Why? Because if you are in a situation where you have a taxable estate, you have absolutely done a decent amount of planning for it while you are alive, which includes planning that makes life insurance money not subject to an estate tax.
Suffice it to say that if someone is asking for this type of advice on this message board, they don't have a taxable estate.
This post was edited on 8/1/14 at 2:09 pm
Posted on 8/1/14 at 2:08 pm to Dr Rosenrosen
quote:
The face amount is generally not taxable. However, there could be interest paid on the claim (depending on the timing of the filed paperwork) and/or dividends which could be taxable.
good catch, though most probably won't have to deal with this.
Posted on 8/1/14 at 2:09 pm to LSUFanHouston
quote:
Suffice it to say that if someone is asking for this type of advice on this message board, they don't have a taxable estate
True, but we wouldn't really be answering the question if we just said it wouldn't be taxable
Posted on 8/1/14 at 2:31 pm to lsujro
quote:
if planned properly, you can avoid taxes altogether in most cases. but under normal circumstances, yes, they are most certainly subject to estate taxation if you are over the exclusion amount. don't spout of BS you don't know about.
I assure you that people with taxable estates make certain that they are not part of their estate. Whole life insurance is used as an estate planning tool as a safety net to pay estate taxes.
Why in the world would someone buy life insurance to protect the estate if the estate is only going to be increased by that value of the death benefit?!?!?! The insured should not be the owner of the policy, and organized estates plan to where the beneficiaries are owners.
You sir, do not know enough about the subject.
Posted on 8/1/14 at 2:33 pm to Bear Is Dead
quote:
Bear Is Dead
You need to stop.
The life insurance, even whole life, by itself factors into an estate. You have to do further planning with it, to have it pass outside of your estate.
Everything he said is accurate. If you just own a life insurance policy, it is part of your overall estate, and if that estate is over the $5M, that portion will be taxed.
ETA: And as Huston said, if someone is on here asking about it, it is a pretty safe assumption to make that their policy is not in a trust.
This post was edited on 8/1/14 at 2:35 pm
Posted on 8/1/14 at 2:34 pm to lsujro
quote:
(nor is it necessary - not many married couples w/ assets >$10 mil).
Also, this is stupid. We came very close to this being reduced to $2mil this past year. I would never plan for a $10mil exemption, unless i would wipe it out in an inter vivos gift.
Posted on 8/1/14 at 2:35 pm to GoCrazyAuburn
quote:
Everything he said is accurate. If you just own a life insurance policy, it is part of your overall estate
The insured does not have to be the owner of the policy. You are wrong.
Posted on 8/1/14 at 2:38 pm to Bear Is Dead
quote:
The insured does not have to be the owner of the policy. You are wrong.
How am I wrong? Sorry that I didn't clarify on the insured and owner being the same. However, the OP makes it seem that way as he asked for typical situations. How many cases do you know of where the insured is not the owner? It isn't that common. As I said, unless you do further planning (which that is), the policy goes into your taxable estate.
Most people do not want to give up ownership of their policy unless they are aware of an estate tax issue.
So, as I said, for the majority of people, the policy will go into their taxable estate.
This post was edited on 8/1/14 at 2:40 pm
Posted on 8/1/14 at 2:42 pm to GoCrazyAuburn
quote:
How many cases do you know of where the insured is not the owner?
Every bit of life insurance where i am the beneficiary.
quote:
It isn't that common.
Very common in the estate planning world.
quote:
unless you do further planning
Which is why they call it "estate planning"
quote:
Most people do not want to give up ownership of their policy unless they are aware of an estate tax issue.
If you own any real estate, plus life insurance, you dont need to be the owner. The exemption is $5.25 mil per person (which is portable through the spouse for another $5.25= $10.5 mil total), but like I said before, we were very close to the exemption going back to $2mil per couple last year.
Posted on 8/1/14 at 2:44 pm to GoCrazyAuburn
quote:
OP makes it seem that way as he asked for typical situations
Op asked how it is taxed. My first comment was that when planned properly, it is non-taxable.
Posted on 8/1/14 at 2:46 pm to Bear Is Dead
quote:
Every bit of life insurance where i am the beneficiary.
Great, but we aren't talking about just you.
quote:
Very common in the estate planning world.
Which, is not very common in the overall financial planning world. Most people don't have estate issues. So, as the OP asked for typical situations, this would not apply.
quote:
Which is why they call it "estate planning"
Do you not understand what typical means?
quote:
If you own any real estate, plus life insurance, you dont need to be the owner.
That is a pretty bold assumption to make. Manypeople like the control of their assets. If they have WL, they would like to be able to have access to their funds when they need them.
Again, you are arguing for what people do when they have estate issues. The rest of us are explaining to the OP what is typical because that is what he asked.
quote:Great. I also doubt it will go back to that level any time soon, but who knows with our government.
like I said before, we were very close to the exemption going back to $2mil per couple last year.
Posted on 8/1/14 at 2:46 pm to Bear Is Dead
quote:
Op asked how it is taxed.
You are leaving out the typical part. This really isn't that difficult. If he has already done estate planning, he is going to know how it is taxed. Estate planning isn't typical, though.
Posted on 8/1/14 at 2:53 pm to GoCrazyAuburn
quote:
Great. I also doubt it will go back to that level any time soon, but who knows with our government.
You have more faith in our govt than I do!
Estate tax makes up less than 1% of the federal budget, yet it is under extreme scrutiny by the dems who spew their message to the world about how the $10mil exemption is keeping lower class families poor.
I actually believe its going down. With that fear, life insurance becomes a very important tool for alot of people.
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