If I am a beneficiary to my brothers’ life insurance policy, can I assign all of my proceeds to my son and will he have to pay taxes?

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If I am a beneficiary to my brothers’ life insurance policy, can I assign all of my proceeds to my son and will he have to pay taxes?

Asked on December 15, 2011 under Insurance Law, New York

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You may have to pay tax (inheritance tax) but this depends on how much was given to you and whether it exceeds the amount of say for an exemption (i.e., gift tax exemption). If let's say you get this deposited into your account, you will most likely have this as realized income/inheritance but if you deposit and cash out for your son, your son may not have to pay but you might. Again, it depends on whether this inheritance meets certain exemptions. Life insurance proceeds are usually (according to the IRS) not taxable unless they were turned over for a certain price. So unless it was turned over for a price, you won't be taxed. Therefore, you can give to your son but keep in mind that if he reports this as income, it could become taxable.


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