Many people have life insurance policies on themself to help protect their loved ones after they are gone. But a frequently asked question is, Are life insurance policies taxable? According to the IRS (IRC 101(1)(a)):
Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren’t includable in gross income and you don’t have to report them. However, any interest you receive is taxable and you should report it as interest received.
Life insurance policies can be an important part of your estate plan to make sure that the money you worked hard to earn goes to the people you care about. A probate and estate planning attorney can evaluate your specific situation and goals, and help you decide the best way to leave assets and protect your loved ones in the future.
Many loving grandparents want to leave a nest egg to their grandchildren to help with their education, to buy their first home, to start a new business, to travel – all the experiences that grandparents want for their grandchildren. If you have invested money in a certificate of deposit or a savings bond, the funds from a CD or savings bond can be used to buy a life insurance policy with yourself as the insured, and your grandchild as the beneficiary. The money your grandchild inherits from your life insurance policy is not subject to income tax and does not have to go through probate.
The death benefit from a life insurance policy can protect your loved ones after you are gone, and provide your grandchildren with the opportunities you want for them.
Probate can be expensive, take months or even years and cause additional stress on your loved ones. Estate and Probate Legal Group attorney Mario Godoy explains more about whether life insurance proceeds are taxable and subject to probate.
Do you have questions avoiding the expense and stress of probate? Our experienced probate attorneys in Lombard, Illinois can advise you on the best options to protect your assets and loved ones. To talk to an estate planning attorney contact the Estate & Probate Legal Group at 630-864-5835.
We provide legal services in Cook, DuPage, Kane, Lake, and Will counties.