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    dkgram3's Avatar
    dkgram3 Posts: 2, Reputation: 1
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    #1

    Jun 13, 2012, 04:00 PM
    Life Insurance divided equally among children personally is not considered taxable or
    If life insurance is divided up among children at time of mothers death, and not put "in estate", is it taxable or considered part of moms estate
    dkgram3's Avatar
    dkgram3 Posts: 2, Reputation: 1
    New Member
    		  
    #2

    Jun 13, 2012, 04:05 PM
    Life Insurance
    If Mom left credit card debt and there are insurance policies divided among children, does the insurance money have to be used to pay these debts.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #3

    Jun 13, 2012, 06:05 PM
    No, insurance proceeds go direct to the beneficiary and are not part of the estate. Nor is it taxable income.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #4

    Jun 14, 2012, 09:27 AM
    One nuance, which is only of concern for very large estates (those that require filing of an estate tax return): if the mother was the owner of the life insurance policy then its value is included in the value of her estate for purposes of calculating estate tax. For example if she bought the policy and named the children as beneficiaries then she is the owner and the policies are included in her estate value. However - as ScottGem pointed out the payout from the policy goes directly to the beneficiaries, and so cannot be used to pay off her outstanding debts.
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