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Posted by Stuart A. Bronstein on January 7, 2007, 11:30 pm
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> Assuming the insured person has no interested in the death
> benefit (why a dead person want to have any interest in his
> life policy?), so what you are saying is the death benefit
> is not included in the decend's estate, i.e. it has no
> implication on the inheritance perspective. Is it correct?
First of all the reason someone would want to own his own
policy is that as the owner he gets to be the one to borrow
against the cash value of the policy, and he gets to choose
the beneficiary of the death benefit.
But you are confusing estate tax with income tax. They are
separate taxes and generally have little or nothing to do
with each other. Insurance proceeds are generally not
included in taxable income for income tax purposes. But the
death benefit of life insurance (in which the decedent had
any incidents of ownership irrespective of who the
beneficiary is) is included in his estatate for estate tax
purposes.
Stu
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Posted by My interest on January 7, 2007, 11:30 pm
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> No and no.
>
> The beneficiary does not receive any taxable income from life
> insurance on another person.
>
> Insurance proceeds are included in the taxable estate of the
> policy holder if the holder retained any of the "incidents
> of ownership." There are several factors that can be
> incidents of ownership but I don't have a list at hand. The
> most commen incident of ownership, however, is the right to
> designate or change the beneficiary. It does not matter that
> the deceased doesn't receive the policy proceeds.
So does it mean, typically, the insurance proceed will be
more likely included in the deceased estate? I don't have
any special point that I can think of, my life insurance
policy is sponsored by my employer, i.e. part of a group
insurance policy and I do have to specify the beneficiary.
BTW, I know US citizens have unlimited marital deduction.
What's the limit that a non-US citizen can inherit tax free
from his deceased spouse?
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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Posted by Stuart A. Bronstein on January 8, 2007, 10:17 pm
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> BTW, I know US citizens have unlimited marital deduction.
> What's the limit that a non-US citizen can inherit tax free
> from his deceased spouse?
It depends. If a special type of trust is used to make sure
that whatever is left to the non-citizen spouse will be
subject to estate tax when she dies, you can still get an
unlimited martial deduction.
Without that you get to pass tax free what you would to
anyone who is not your spouse. That is $2 million for
people dying in 2007 and 2007, $3.5 million for people dying
in 2008, no tax at all for people dying in 2010, and back to
$1 million again for people who die in 2011 or after (unless
the law is changed again, of course).
Stu
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by kastnna on January 8, 2007, 10:17 pm
Please log in for more thread options My interest wrote:
> So does it mean, typically, the insurance proceed will be
> more likely included in the deceased estate? I don't have
> any special point that I can think of, my life insurance
> policy is sponsored by my employer, i.e. part of a group
> insurance policy and I do have to specify the beneficiary.
As someone said above the key phrase is "incidences of
ownership". If you retain any rights of control over the
policy, it can be included in your estate (access to
loanable cash values, rights to designate beneficiaries,
etc).
Many people use trusts and/or family LLC & LLP to remove an
insurance product from their estates, but do not realize
that their control over the trust/corp gives them incidences
of ownership.
I do not work with group policies, but if you have an
ongoing right to change the policy beneficiary (which I
imagine you do) you have incidences of ownership and it will
be includable in your taxable estate.
Whether or not your beneficiaries actually pay taxes on your
estate are another matter. Than depends on who your 'benes'
are, the value or your estate at that time, and current
estate tax laws (which are heading towards major change in
the next 3 years).
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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