Allen is saying that the 150k in cash is already tax-free...
Your second sentence is a reference to estate taxes whereas Allen is talking income taxes.
I'm not sure what you mean about a direct family member.
Life coverage for 86/85 year old
- Thread starter paulallred
- Start date
Your second sentence is a reference to estate taxes whereas Allen is talking income taxes.
I'm not sure what you mean about a direct family member.
TIMOTHY SEBASTIAN
Expert
- 24
Ohh income tax. I assumed any insurance agent would be talking about estate tax. In Kentucky anything over like $2k is taxable under the estate tax if it goes to a nephew or someone like that. Wife children ect are completely tax free I think. I only breezed over it because I didn't think it was too important for medicare and final expense agents.
Gotcha...you're talking about a state inheritance tax which, lucky you, is only in a handful of states.
- 4,568
I believe the original poster was talking about "income taxes", not estate taxes. for the most part, the only assets a beneficiary owes income taxes for at death are:
1. Traditional- SEP-Simple IRA/401k/403b type qualified assets have income taxes due on the entire distributions when they receive the funds as they were tax deducted when the were invested in & tax deferred on the growth.
2. Non Qualified Annuities. the deffered gains have income taxes due by the beneficiary when they receive the funds
3. Capital assets like after tax stocks, bonds, mutual funds, land, etc. they have no income taxes & would have no capital gains owed by the beneficiary if they received them after death. If their name was placed on the accounts/deeds during lifetime, they would not receive the step up on cost basis afforded when received at death
4. Roth IRA/Life Insurance-- no income taxes due when received because of tax code related to these items
5. bank account type money--no income taxes when received because the owner paid income taxes each year when the 1099 reported the interest on the account & the money invested was after tax money.
Now, in terms of Estate taxes, all of the above plus many other assets would be included in the value of the estate & like you said, Estate taxes would only currently apply if estate size was approx. $11M+ per spouse
- 4,568
and, if the original poster was talking about state or federal estate tax, it would have no impact whether it was $150k bank money or $175k Life face payout to the bene. if the deceased owned it, it would still be part of the value of the estate for calculation purposes. if a state has an estate tax, might even negate more of the possible small benefit of the face amount leverage for an 86 year old if they would now owe estate taxes on the extra $25k of life face bought
