Why does a widow have to pay taxes on life insurance?

Question

Why does a widow have to pay taxes on life insurance?

Answer 1

Mskittytwo,

Most Life Insurance benefits paid to a named beneficiary (like the widow) are free of probate expenses and are not taxable to the beneficiary as income.  However, the amount of the death benefit may be includable in the estate of the of the person who passed away for estate tax purposes. I doubt this is a problem for the widow, but just in case, she might consider a chat with an estate planning professional to make sure.

Good Luck,

Grampy

Answer 2

she would pay taxes only if she was not the beneficiary. If the life insurance went into the husbands estate then estate taxes are pretty heavy.

They needed a better financial planner.  yikes

Answer 3

Most life insurance settlements are not taxable.  Retirement benefits, paid on behalf of a deceased individual, are taxable, though.

Answer 4

Because she was not the beneficiary of the policy - her husband's estate was.  Then the procedes become part of the estate, and death taxes must be paid before it can be distributed to her.

Answer 5

If the estate is the beneficiary, then the proceeds go into the estate, and may be subject to the estate tax,.

If the widow is named as beneficiary, then there should be no tax.