When I croak
- Thread starter DoWhat
- Start date
willie
Well-Known Member
Except in rare cases, no.
bcp
In My Opinion
might have to if it is a policy that was part of the employers compensation to you.
Tilted
..
Generally speaking, if you controlled the policy (e.g. were the one authorized to make changes to it), no. But, it would likely count against your estate and thus your estate would essentially have to pay taxes on it if your total estate value was above the exemption amount. Currently, the federal exemption is $5 million and the rate is 35% above that. That exemption could, of course, change though.
Also, who knows what crazy scheme Maryland will come up with. For a period of time, it had put in place a ridiculous scheme with regard to taxing estates. It had traditionally had a fairly low estate tax rate (i.e. compared to the large federal rate). But, after the federal laws were changed, early in President Bush II's Administration, to increase the federal exemption above $1 million, Maryland designed a system where its own rate remained fairly low up to a certain amount of the estate, and then spiked to a very high rate for a small range of the value of the estate (I don't recall the range, but it would have been something like between $1 million and $1.4 million), and then dropped back down to a low rate above that range. In effect, what Maryland was doing was claiming for itself the federal estate tax which was then not going to be paid to the federal government because the federal government decided to raise its exemption. It essentially said - 'well, since the feds don't want that tax revenue, we'll just take it ourselves.'
The last time I looked at Maryland's tax laws, it appeared to me that that scheme had been changed back to something more reasonable (and less offensive). But, as I said, who knows what it will do now that the federal government has enacted a $5 million exemption going forward. If it did something similar, life insurance policies that pushed the value of an estate over $1 million or $2 million might end up being heavily taxed by the state.
EDIT: Since the OP's question was about life insurance going to a spouse, rather than life insurance going to someone other than a spouse, and since federal estate tax law allows much of the property that goes from a decedent to a spouse to be deducted from the decedent's gross estate for estate tax purposes, I decided to do a little research with regard to the estate tax treatment of life insurance proceeds paid to a spouse. In short, I'm still not sure if such proceeds are covered by 26 U.S.C. § 2056, and thus not taxable for the estate. But, I suspect that they are, which would mean there would be no (estate) tax on them.
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desertrat
0_0
No.
Lurk
Happy Creepy Ass Cracka
Are you feeling a little under the weather?
bulldog
New Member
migtig
aka Mrs. Giant
And it also depends on how his insurance is set-up. It can also depend on how his estate needs to handle his affairs after he's gone. My mom - I owed no taxes and had to make no payments to any of her creditors - she had planned things out correctly. My dad - I owed for years, but not just taxes, but I wound up assuming his debt as well - which was the state law at the time where he passed.
desertrat
0_0
So which is it?
In my case 3 policies, no taxes.
My mom - I owed no taxes and had to make no payments to any of her creditors - she had planned things out correctly. My dad - I owed for years, but not just taxes, but I wound up assuming his debt as well - which was the state law at the time where he passed.
I can't see how estate figures in since she is still alive. Unless it doesn't all go to her, which it should.
Tilted
..
So which is it?
Life insurance proceeds (other than interest paid in addition to the pay out value of the policy at the time of death) are not income taxable. However, if the decedent still owned the policy, those proceeds count as part of their gross estate and thus might be estate taxable. In cases where those proceeds go to a spouse, I believe - but am still not sure - that they are not estate taxable.