what if the beneficiary does not want life insurance proceed

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Posted: Mon Jul 20, 2009 9:25 pm Post subject: what if the beneficiary does not want life insurance proceed

what if the beneficiary does not want life insurance proceeds? Can it be directed to the estate? _________________ Register Now to have your Insurance queries solved.

Guest

Posted: Tue Jul 21, 2009 2:58 am Post subject:

Yes of course the proceeds can be directed to the estate but don't you thing you should have asked this question on lefe insurance forum

Neetalia

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Joined: 15 Jul 2009
Posts: 30

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Posted: Tue Jul 21, 2009 11:15 am Post subject:

Hi Guest, why do you want to direct the benefits to the estate of the deceased? The life insurance benefit normally doesn't attract tax on it but the death benefit if attached to the estate would be subjected to estate tax.

kelvin

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Joined: 22 Nov 2005
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Posted: Tue Jul 21, 2009 12:30 pm Post subject:

Why would the beneficiary deny life insurance proceeds? Is it due to the tax consequences? _________________ Register Now to have your Insurance queries solved.

anonymous00

Guest

Posted: Tue Jul 21, 2009 6:03 pm Post subject:

Quote:

what if the beneficiary does not want life insurance proceeds? Can it be directed to the estate?

A beneficiary can disclaim the life insurance. The beneficiary can't direct it anywhere.

Quote:

Yes of course the proceeds can be directed to the estate

Incorrect. When a beneficiary disclaims, the benefit will get paid to the contingent beneficiary.

Quote:

The life insurance benefit normally doesn't attract tax on it but the death benefit if attached to the estate would be subjected to estate tax.

Whether the death benefit gets paid to a living beneficiary or to one's estate will have no impact on the taxation. In either case, if the insured is the owner, it will be part of his taxable estae.

Quote:

Why would the beneficiary deny life insurance proceeds? Is it due to the tax consequences?

Yes.

Ex. Mr. Jones dies with a $1,000,000 life insurance policy. Mrs. Jones is the beneficiary. Davey Jones, their son, is the contingent beneficiary. Let’s assume that the future gift and estate tax exclusion is $1,000,000 per person.

Mrs. Jones disclaims the insurance. She has no say in where it goes. It gets paid to Davey. It will be tax free and Mr. Jones has used his $1,000,000 exclusion.

1 year later, Mrs. Jones dies. She has $1,000,000. It goes to Davey tax free.

If Mrs. Jones would not have disclaimed the life insurance (let’s assume 0% growth), when she died her estate would have been worth $2,000,000. There would be an estate tax due on the 2nd $1,000,000. Davey would wind up with less than $2,000,000.

InsuranceExpert

Senior member