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Thread: No beneficiary on life insurance

  1. #1
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    Default No beneficiary on life insurance

    If I died and I had a life insurance policy through my company, would that benefit be taxable to my beneficiary through either California Franchise Tax Board or the IRS?

  2. #2
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    Default

    If there is a named beneficiary, such as spouse, children, sibling, there should be no income taxes due. You title your thread no beneficiary on life ins. If there is no named bene at your death, the policy provisions will prevail & "generally" the proceeds will go to the estate of the deceased & distributed as per the will or if no will per the state's intestate succession law. There then could be federal estate taxes or state inheritance taxes due.
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  3. #3
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    This is probably true, but not certainly true. Example. Bob is a very important employee to a very big company. Bob asked and received 100 million dollars in life insurance paid for by Bob's employer. If Bob dies, that is almost certainly going to be taxable because Bob did not pay for the insurance, and the insurance (vastly) exceeds the GTL exclusion. To make life insurance non-taxable, either the policy holder pays for the coverage or the employer follows the GTL rules. This is very well understood and most policies are structured around these rules. Most employers give everyone free life insurance up to the GTL limits, then have a non-GTL term policy that the employees can use to buy additional cheap life insurance using post-tax dollars. This stuff is spelled out in great detail in IRS pub 15B.
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