Traetment of life proceeds when other assets are well below estate tax limits

Posted in Term Life Insurance over 2 years ago, 1 reply

2 children recieve 5 million each in term life proceeds, after parents die. Parents estate consists of 500K in Real estate value and 500K in IRA, the life policy on mom was 10M. do the kids legally owe any estate tax? I was told that the life proceeds come to them personally and do not have to be paid to estate tax. What happens if they walk with money, are they breaking law. There would be no taxable estate if not for life policy!

submitted by nick in princeton, wv

It depends on whom owned Mom's life insurance policy.

If Mom owned it, then yes, it is subjected to estate taxes (which will be getting higher).

If her financial advisor had the foresight to have someone else own the policy, either a person or a trust, then the 10 million is not figured in to the estate tax.

Ownership is the defining issue here.

BTW, I bet in 2012 (when the estate tax law needs renewed), while our government is scrambling to find dollars, the estate tax bracket will be lowered. Anyone with an estate over 1 million, or even less, will have to pay.

That, is scary.

submitted by Andrew Burks in Salem, IN @ May 18, 2009 - 09:59 AM

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