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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1496
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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my wife just died several days ago she has a life insurance

Customer Question

my wife just died several days ago she has a life insurance of 1x her salary,a pension from private pension not a union pension and a 403b . what is taxable in illinois or by feds also we jointly owned a home together which i would like to use the proceeds from all to payoff house, pay for my daughters college education. its under 2million in assets
Submitted: 4 years ago.
Category: Tax
Expert:  Arthur Rubin replied 4 years ago.

Arthur Rubin :

Sorry to hear about your loss.

Arthur Rubin :

There are multiple questions as to what is taxable; Federal estate tax, Illinois estate tax, probate fees, Federal income tax (on either the estate or on her or you), and Illinois income tax.

Arthur Rubin :

Insurance is counted for estate tax, but not for income tax.

Arthur Rubin :

403b are counted for estate tax, but only for income tax when withdrawn.

Arthur Rubin :

The present value of the pension may be counted for estate tax; pensions are partially taxable for income tax if she made contributions, and taxed in full if she did not.

Arthur Rubin :

For estate taxes, the Federal exemption corresponds to $5 million, the Illinois exemption has recently been increased to $3.5 million, and there is an unlimited marital exemption (in other words, what goes to you isn't counted against the exemption limits.)

Arthur Rubin :

I made a slight mistake; the Federal exemption was increased to $5.12 million for an inflation adjustment.

Arthur Rubin :

Any payment made to her after her death is subject to both estate tax and income tax to the estate, or to the beneficiary if transferred. (This last is a bit simplistic, but it's approximately correct. The precise phrasing is that income to the estate is allocated to the beneficiaries if at least as much is distributed as the amount of otherwise taxable income.)

Arthur Rubin :

If you need further help, please ask. I'm not online continuously, but I'll reply as soon as I see the question.

Customer: replied 4 years ago.
After reviewing this matter with a CPA the fact is that in my circumstances under 2m dollars my insurance and pension proceeds are not taxable in any way and the 403b isnt either if I put it in my name and draw on it after 59 1/2
Expert:  Arthur Rubin replied 4 years ago.
Your CPA is correct as to estate tax, and there is no inheritance tax for Federal or Illinois purposes. However, the pension is (at least partially) taxable for income tax purposes, and withdrawals from the 403b are (almost certainly) taxable.