Tax Facts

70 / If life insurance death proceeds are left on deposit with the insurance company under an interest-only option, is the interest taxable income to the beneficiary?

Yes. All amounts paid or credited to a beneficiary as interest (excess and guaranteed) must be included in the beneficiary’s gross income regardless of whether the insured or the beneficiary elected the option.1 The interest is taxable in the first year that it can be withdrawn. If the beneficiary elects an option under which there is no right ...
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