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| Tax
issues with life insurance cash values, dividends, and death benefits | | The
"interest build-up" portion of the annual increase
in the policy's cash value is not taxed.
Dividends generally are considered to be a "return
of premium" and are not taxable. Although life
insurance death proceeds will not typically be subject
to income taxation, they may be subject to
federal estate taxation. If you own part or all of
the policy when you die, those can be included in
your gross estate for federal estate tax purposes.
State inheritance taxes and federal gift taxes
may also apply to life insurance policies/proceeds
under specific circumstances. Contact your tax
adviser regarding questions about possible income,
estate and gift tax consequences surrounding any
life insurance you own or are contemplating
buying. |
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