Structuring Life Insurance to Avoid Income Tax

By | February 6, 2009
Great article from Forbes on why you need to structure Life Insurance beneficiaries correctly to avoid any income tax. This is a great read for items to be aware of while setting up your planning.
clipped from www.forbes.com

Life Insurance

Beneficiaries of life insurance usually avoid taxes on the payout, but in some situations the policy can be taxed–the tax determination is based on how you structure the policy. Life insurance can be taxed in the following cases: if you transfer a policy for valuable consideration (that is, you take the cash value of the policy), if the policy was arranged without an insurable interest based on state law (that is, if you indicated no beneficiary) and sometimes when the policy is employer owned. (For related reading, see “5 Mistakes That Can Ruin Your Life (Insurance)” and “Cashing In Your Life Insurance Policy.”)

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