Death tax question

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steelerfan
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Death tax question

Post by steelerfan »

A co-worker asked me about having to pay taxes on an inherited life insurance policy. My coworker lives in Georgia and her grandmother lived in NJ (if that makes a difference). My coworker received paperwork and one question was, "Do you want us to withhold taxes?"

What is my advice?

Thanks
"As your wealth grows do not set your heart on it." steelerfan
Jack FFR1846
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Re: Death tax question

Post by Jack FFR1846 »

Are you sure its an insurance payout and not an annuity from an insurance company? DW recently inherited a number of accounts from an aunt. An annuity had a check payout as an option (which she took) and it did have options for tax withholding.

She also was the beneficiary of a life insurance policy. There is no tax on that and no option to have taxes withheld on the form.
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NYCPete
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Re: Death tax question

Post by NYCPete »

There's no inheritance tax in Georgia. Is the estate the coworker is inheriting from above the federal estate tax exemption of $11.58 million?

Agree with previous poster that it may be an annuity-like account. Could also be a life insurance company that was holding an IRA or Roth IRA account. There will be income tax issues for the co-worker in that instance when they withdraw money from the account.

IMO, too little known to offer any kind of advice. Bad to be on the hook for money lost or taxes owed because you didn't know some detail about the co-worker's situation.

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Peter
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Stinky
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Re: Death tax question

Post by Stinky »

Jack FFR1846 wrote: Tue Jun 15, 2021 12:50 pm Are you sure its an insurance payout and not an annuity from an insurance company? DW recently inherited a number of accounts from an aunt. An annuity had a check payout as an option (which she took) and it did have options for tax withholding.

She also was the beneficiary of a life insurance policy. There is no tax on that and no option to have taxes withheld on the form.
This is the right answer.

Death benefit from a life insurance policy = no taxes due.
Death benefit from an annuity policy = taxes may be due.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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steelerfan
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Re: Death tax question

Post by steelerfan »

Annuity - so it is taxable. Thanks.
"As your wealth grows do not set your heart on it." steelerfan
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