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Gerri A Harrison CFP EA
Gerri A Harrison CFP EA, Enrolled Agent
Category: Tax
Satisfied Customers: 252
Experience:  27 years of preparing income tax returns - both personal and small business
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How do I avoid or reduce paying taxes as the beneficiary (two

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How do I avoid or reduce paying taxes as the beneficiary (two $500k policies - I'm 100% beneficiary of one of the policies and 70% beneficiary of the 2nd; my brother receives the other 30% and my father is contesting the policy because my mom changed it 3 weeks before she died and gave his 1/3 share to me; cause of death natural but unknown) of my mom's life insurance policy (date of death: 12/27/09).

Life insurance proceeds are not taxable for income tax purposes. You will not need to pay tax on whatever you received. If your mother's estate is large enough and she was the owner of the policies there may be estate tax due, but never income tax.


You should not get a tax document for either of these policies and have no reason to report the receipt of them


With your father contesting, if the proceeds have been held up you may have some interest income to pay tax on since the insurance company is required to pay interest while it remains in their hands after the date of death. But again the actual proceeds from the policies are not taxable.


If the proceeds are annuities or IRAs or pension plans that is a different answer.


This is think should be very good news for you. If you have a further question, hit the need info button and ask it. If you are satisfied with this answer, please hit the green accept button to close out of the question so that I may get paid.

Customer: replied 6 years ago.
I looked up the Ohio State Estate Tax. Is there anyway to reduce this by donating any to charity or something like that? Is the amount of the estate taxed owed based on the total amount of the policy or each beneficiaries percentage and if the former, what if the other beneficiary refuses to pay his portion?
(The Answer was very useful and I will accept, I just wanted further elaboration of some of the points you mentioned.)

The amount taxed is the total less applicable deductions. One of those is if you donate to charity so you can reduce it by that. Also, administrative fees for getting the estate settled such as legal and accounting fees, appraisal fees, etc.


The estate tax should be paid before monies are distributed if there is any money within the estate. Since life insurance is paid directly to the beneficiaries that money is typically not in the estate but not sure if there is anything else in there.


If the life insurance is the only thing then the tax is due by anyone who is receiving proceeds from the estate. Technically this should be paid proportionately, but every state usually goes after the person it is easiest to collect from if the tax is not paid and they will start with the executor if possible since one of his responsibilities is to settle the estate.


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