 Posted: Fri Nov 06, 2009 5:31 am Post subject: |
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BNTRS had a good point of the tax-free status of the death benefit. Just a few things to clarify those comments.
Death benefits, if paid in a lump-sum are almost always received tax-free to the beneficiary. However, if the death benefit is being paid in installments instead, there will be interest included in those installment payments and that interest will be taxable every year at ordinary income tax rates. Death benefits can be taxable if the policy violated certain tax code provisions, but you would (or should) have received paperwork from the company on this.
The only way that the death benefit would be included in her estate is if the policy was an individual plan and your mother owned the policy. Group insurance policies are owned by the sponsor of the plan, therefore there would be no effect on her estate. There are other rare circumstances in which the death benefit would be included in her estate, but I doubt that would be the case here.
InsTeacher  |
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InsTeacher
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