Federal Tax Considerations for Life Insurance and Annuities
A death benefit is excluded from the beneficiary's income. Does that settle the position for estate tax as well?
Answer and explanation
Answer: C. Income tax and estate tax are separate questions: proceeds excluded from income are still included in the gross estate where the insured held incidents of ownership or the estate is the payee. Naming an individual does not by itself remove them, and there is no one year purchase rule of that kind.Source: 26 U.S.C. § 101 — 26 U.S.C. §§ 101, 2042
More federal tax considerations for life insurance and annuities questions
- How are amounts received by a beneficiary by reason of the insured's death generally treated for income tax?
- How are increases in the cash value of a life insurance policy treated while the policy stays in force?
- How are policy loans from a life insurance contract that is not a modified endowment contract generally treated for income tax?
- How does classification as a modified endowment contract change the taxation of cash value increases taken out?
- How is the interest an individual pays on personal policy loans generally treated?
- On what basis are dividends paid under a participating whole life policy?
621 New York questions like this one.
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