Life Insurance Payout and Taxes

puckhead

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Looks like I might get a couple bucks from Dad's life insurance policy. It's not much, but I want to split three ways with my half-brothers. Quick look on the IRS website says this:

Do I report proceeds paid under a life insurance contract as taxable income?


Answer:​

  • 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.


Any advice would be appreciated.
 

Dback Jon

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That is correct - unless there is something very unusual in the policy, it is not taxable.
 

dscher

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Yep. If it's a straight basic death benefit plan, you should be good. I'm not sure how variable plans/VUL would work if there is cash value from invested funds though.
 
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puckhead

puckhead

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Is there anything special to be done in order to split with my half-brothers? I don't want them getting audited either.
 

dscher

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Is there anything special to be done in order to split with my half-brothers? I don't want them getting audited either.
I was assuming it to be an after tax gifting of proceeds, but double checked and found this. Hope it helps.

 
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puckhead

puckhead

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I was assuming it to be an after tax gifting of proceeds, but double checked and found this. Hope it helps.


That is quite helpful. In fact, that's basically identical to my situation. Thank you.
 

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