Is Life Insurance Taxable Tampa Florida
Is My Life Insurance Payout Taxable?
Generally proceeds from a life insurance policy are not taxable income. The following is a list of most common scenarios concerning life insurance coverage.
Life insurance is a fantastic way to pass along money while avoiding paying taxes on it.
If a life insurance policy pays a claim, it is usually a very large sum of money by most measures. Many policies even provide coverage for over a million dollars. If a policy pays a claim, the entire death benefit will be paid tax free in most situations.
The only requirement for the death benefit to qualify as a tax free payment is for the owner of the policy to be someone different than the insured person for at least the previous three years of the policy’s existence. This is why many policies are owned by either the spouse of the insured person, or they are owned by a trust.
HOW IS THE DEATH BENEFIT DISTRIBUTED?
In a normal life insurance policy, once the insured dies the benefit passes to the beneficiaries with no issue and no income tax.
From the insurance company straight to the beneficiary
What if the beneficiary is dead already? Or, what if the policy owner never named a beneficiary in the first place?
In either of these cases, the proceeds pass onto the estate of the owner and may be subject to estate taxes.
ARE DEATH BENEFITS TAXABLE INCOME?
No! The amount of money that passes to a beneficiary from a life insurance policy is income tax-free.
However – any amount above the death benefit would be taxable as income at regular interest rates.
IS LIFE INSURANCE TAXABLE UPON DEATH?
No. Life insurance proceeds to beneficiaries are not taxable upon death as income.
However – If the owner of the policy was also the primary insured, the amount of life insurance will be included in the gross estate for estate tax purposes.
DO I HAVE TO PAY TAXES ON MONEY I RECEIVED FROM A LIFE INSURANCE POLICY?
No. As a beneficiary, life insurance proceeds pass directly to you from the life insurance company and avoid income tax and probate.
However – If you earn any income from the life insurance above and beyond the policy face amount, like interest, that will be taxable.
Insurance has the advantage of adapting to your particular needs. In addition, life insurance provides your heirs tax free amounts that can protect against creditors, probate fees and other costs of administration of an estate.
Mintco Financial offers a full range of personal insurance products. Depending on your personal needs, family, economic and tax we will guide you in order to offer the best product available on the US market.
Call us in Florida 813-964-7100