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Paying taxes on death benefits

Discussion in 'Life Insurance, Annuities & Other' started by mindy23, Jun 15, 2015.

  1. mindy23

    mindy23 Law Topic Starter New Member

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    Recently, our 20 year term life insurance was set to expire. Because my husband has stage 4 cancer, has had a heart attack and several strokes, it would be impossible to re-insure him. We did, however, without forethought, pay for the terminal illness policy, and were able to cash in the policy due to that.
    Does anyone know if we will have to pay taxes in this? The company took 8% out of the original amount, but we're still concerned we may need to set aside an amount for taxes.
     
  2. army judge

    army judge Super Moderator

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    The proceeds of most life insurance policies aren't taxable.
     
  3. Betty3

    Betty3 Super Moderator

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    I worked for a life ins. co. Generally life ins. paid at the death of the insured to the beneficiary is not taxable. However; if any or part of the proceeds are paid while the insured is living that "sometimes" can trigger a taxable income. You might ask your ins. agt. about your specific policy.
     
  4. mindy23

    mindy23 Law Topic Starter New Member

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    Thank you both. The tricky part of this is that, thankfully, he is still alive, and collecting his SSD income, so we're concerned that at the end of the year, Uncle Sam may just roll this all into one big income. Guess we'll see..in the meantime, we paid off our mortgage, but put the rest in savings.
     

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