Life insurance is paid with after tax dollars and the death benefit is in most situations non-taxable.
In Canada, if the death benefit is paid to a named beneficiary it is paid directly and bypasses probate. This would avoid any probate fees.
LIfe insurance policies, especially Endowment Policies , used to be used as Registered Retirement Savings Plans . The death benefit of these policies is taxable.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
One of the best reasons why people buy life insurance is because there the proceeds are not subject to income taxes.
There are situations where the benefits can be subject to estate taxes or a certain setup can result in gift tax consequences. The most well-known situation is what's commonly referred to as the "Goodman Triangle" (named after a court case). This is when the policyowner, the insured, and the beneficiary are three different parties (e.g. a husband is the policyowner, the wife is the insured, and the kids are the beneficiaries). When structuring the policy, you want to have two of the three parts being the same person/entity (e.g. policyowner and insured are the same person and beneficiary is different or policyowner and beneficiary and the same person and insured is different).
If a policy is owned by a trust such as an Irrevocable Life Insurance Trust (ILIT), the insured and beneficiary will be the trust and the insured will be the person who's life the trust was created for.
I hope the information is helpful - please feel free to contact me for help and if you have any questions. Thanks very much.
Most life insurance is passed to the beneficiary income tax free. If the life insurance amount, added with the rest of the estate, exceeds the estate tax exemption, it is possible the part of the life insurance could be subject to estate taxes. Also, a cash value policy that is a modified endowment contract has too much cash value to be allowed all the tax benefits of life insurance.
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In Canada, if the death benefit is paid to a named beneficiary it is paid directly and bypasses probate. This would avoid any probate fees.
LIfe insurance policies, especially Endowment Policies , used to be used as Registered Retirement Savings Plans . The death benefit of these policies is taxable.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
There are situations where the benefits can be subject to estate taxes or a certain setup can result in gift tax consequences. The most well-known situation is what's commonly referred to as the "Goodman Triangle" (named after a court case). This is when the policyowner, the insured, and the beneficiary are three different parties (e.g. a husband is the policyowner, the wife is the insured, and the kids are the beneficiaries). When structuring the policy, you want to have two of the three parts being the same person/entity (e.g. policyowner and insured are the same person and beneficiary is different or policyowner and beneficiary and the same person and insured is different).
If a policy is owned by a trust such as an Irrevocable Life Insurance Trust (ILIT), the insured and beneficiary will be the trust and the insured will be the person who's life the trust was created for.
I hope the information is helpful - please feel free to contact me for help and if you have any questions. Thanks very much.