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Life insurance death benefit payouts are tax-free, whereas beneficiaries will need to pay taxes on annuity earnings and death benefits received from pensions, 401(k)s and IRAs.
Individual taxable brokerage accounts. Your individual taxable investment account belongs only to you. That’s why adding a beneficiary to your individual account is the fastest way to transfer ...
In addition, the death benefit remains tax-free (meaning no income tax and no estate tax). As the cash value increases, the death benefit will also increase and this growth is also non-taxable. The only way tax is ever due on the policy is (1) if the premiums were paid with pre-tax dollars, (2) if cash value is "withdrawn" past basis rather ...
A MEC still receives tax free investment returns, and a tax free death benefit, but withdrawals of cash value in a MEC are on a 'LIFO' basis, where earnings are withdrawn first and taxed as ordinary income. If the cash value in a contract exceeds the specified percentage of death benefit, the policy no longer qualifies as life insurance at all ...
Variable annuities are insurance contracts designed not only to provide regular income during retirement but also a death benefit to the policyholder's beneficiaries. The latter ensures that a ...
Therefore, if the taxpayer's sister were to sell the house for $100,000, she would not have to pay any income tax because the sales price ($100,000) minus her stepped-up basis ($100,000) would be a capital-gain income of zero. See the explanation under "Rationale for stepped-up basis" (below) for an explanation of why the Tax Code would do this.