Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

My sister owned a $60,000.00 life insurance policy. In May

My sister owned a $60,000.00...
My sister owned a $60,000.00 life insurance policy. In May 2009 she changed the beneficiary (with her husband's approval) to me and then on August 25, she changed the owner of the policy from herself to me. This was done so that I would have control of the policy and the proceeds in order to give her husband a monthly income after her death. He does not handle money well and knew he would spend or loan out all the money in a short time then be left with nothing to supplement his social security income. My sister died September 26, 2009. I have not filed a claim on this policy yet because I need to know the tax effect it will have on my income taxes if I do accept the entire $60,000.00 in my name. I do have the option of assigning the proceeds back to the husband. Thank you
Show More
Show Less
Ask Your Own Tax Question
Answered in 3 minutes by:
10/3/2009
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
Hello twister,

Life insurance proceeds are not taxable regardless of who the beneficiary is on the policy.

So this will not be a taxable event for you, and does not even need to be reported on your tax return.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you twister and let me know if you have more questions.





Ask Your Own Tax Question
Customer reply replied 8 years ago
I had read elsewhere, which is why I was confused, that the changes on the policy have to be made during a certain time period - as in 3 years before. Also something about $11,000 or $13,000 being subject to givet tax.
Hello again twister,

What you read about the 3 year rule pertains to ownership of the policy, but this will not be an issue for you unless your sister's estate was subject to estate taxes. In order for her estate to be subject to estate tax, her entire estate would have to be valued at $3.5 million or more.

Just to try and explain briefly how this affects policy ownership -- when someone takes out a life insurance policy, the proceeds of that policy are not actually taxable to the beneficiary. However, if the person who takes out the policy has a large estate, when that person dies, the value of the life insurance is included in the value of their estate if they are also the owner of the policy. So if your sister had a large estate and she also had life insurance policies where she was the owner of the policy, the value of that life insurance would be included in her estate valuation.

When you switch ownership of a policy to someone else, if the original owner of the policy were to die within 3 years of that change being made, the value of the policy is still considered to be part of their estate. Once 3 years has passed, the policy is no longer considered to be part of the estate and it is considered an asset owned by the new owner to whom ownership was transferred.

So none of this would even apply except in cases where estate tax was an issue, on large estates of $3.5 million or more.

As far as the gift tax -- life insurance is not a gift to you. Gifts would be when you give your own money to someone else. Under current law you are allowed to give another individual up to $13,000 each year without having to file a gift tax return. Gifts below that amount do not need to be reported.

Once you receive these life insurance benefits, that then becomes your money. If later you plan to give some of this money to your sister's husband, that will be considered a gift. If you give him more than $13,000 in any one year, you would then need to file Form 709 to report the gift given. But even if this were to happen, you would still not actually owe any gift tax. Under current law every individual is allowed to give gifts of up to $1 million in their lifetime before any gift tax actually becomes due. Gifts below $13,000 a year do not need to be reported. Gifts which exceed that amount must be reported on Form 709, and the amount you report then reduces your remaining lifetime exemption.

If this was helpful please press the Accept button. Positive feedack is also appreciated.

Thank you twister

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
Merlo and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Merlo Your Own Question
Merlo
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
9,783 Satisfied Customers
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad

Merlo is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Are you familiar with income tax laws on business and
Are you familiar with income tax laws on business and personal returns? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Information on Gift tax return. My 100 year old mother wants
my 100 year old mother wants to gift the balance of a home loan to my brother, Balance is aprrox $35,000. What are the mechanics? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
I filed for an extension to file my 2017 income tax return.
I filed for an extension to file my 2017 income tax return. I recently suffered a stroke - 6 weeks ago - and have been unable to finalize my return. I should be able to file it within the next 30 days… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
I have a income and my real estate taxes on my home doesn't
I have a income and my real estate taxes on my home doesn't not seem to affect the amount I owe in taxes on the 1040 , what is the reason for this?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
Adjusted individual tax return for 2014(Iowa),says no
Adjusted individual tax return for 2014(Iowa),says no response to letter of inquiry,disallowed health insurance. deduction.says my wife and I owe$600.00.she called # and was told to show proof of insu… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a NJ estate tax return to prepare for a decedent in
I have a NJ estate tax return to prepare for a decedent in NJ. The brokerage statement has an account with the decedent and a trustee set up for her grandson under a U/W/O . Are these assets included … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Is everyone who works expected to pay income tax, If a
If a person cannot supply information to say he can provide for his wife & child what is he refusing to tell the powers that be … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How do I request my 2016 Individual Personal Income Tax form
Sir, how do I request my 2016 Individual Personal Income Tax form (form 1040) on line? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
This is a question about state income taxes between IL and
This is a question about state income taxes between IL and WI. Earlier this year, my wife and I were living in WI, I worked for a WI employer and she worked for an IL employer. We filed state taxes in… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I lost my W2 form 2014 &15 but I have my income tax return
I lost my W2 form 2014 &15 but I have my income tax return form with me .can I show that to them insted of W2. Form at the same years where I filed. My taxes ? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
How do I get a copy of my joint income tax returns for the
How do I get a copy of my joint income tax returns for the last 4-5 years, files via turbo tax?… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
For NY income tax returns... Are full-time residents
For NY income tax returns... Are full-time residents required to pay income taxes on k-1 investments earned in other states (e.g., TX)?… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Is a 1040 US Individual Income Tax Return federal income
Hi Is a 1040 US Individual Income Tax Return federal income taxes owed to the US government? Or is it FICA? I received a letter owing some back taxes and since I'm a priest with a weird set of tax exc… read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
682 satisfied customers
Federal income tax question to determine if gift taxes are
Federal income tax question to determine if gift taxes are involved. … read more
socrateaser
socrateaser
1,031 satisfied customers
I've prepared gift tax returns for my mom's trust for three
I've prepared gift tax returns for my mom's trust for three years. I've shown 100% of all funds put into the trust in the year funded. All gifts have been in cash and are immediately available for dis… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How do I have to amend a Gift Tax return? The original
How long do I have to amend a Gift Tax return? The original return did not indicate that the gift should be part of the lifetime gift tax exclusion. I want to correct that mistake. The gifts totaled a… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x