Herb Smith wrote:

- quote -

Form 709A is obsolete, as of 21-Oct-2003.

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kiotieus[at]yahoo.com (Sean B.) wrote:

- quote -

There is generally no income tax on life insurance, but
there may be estate tax. Your local law will determine who
is responsible for that tax, but your aunt and uncle may
well be if the estate does not have sufficient funds to pay
it otherwise.

But you are saying that your uncle and aunt will sign the
insurance over to you. If they have no children they might
be able to execute a qualified disclailmer. But that has to
be done within nine months of the deaths. It's also fairly
complicated so you really ought to talk to a tax lawyer to
determine if that will work.

Otherwise there may be gift tax from your uncle and aunt to
you. It's unlikely that anything will have to be paid
currently, but a tax return may need to be filed.

Stu

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kiotieus[at]yahoo.com (Sean B.) wrote:

- quote -

The designated beneficiary of a life insurance policy owned
by the decedent receives the proceeds tax-free. Subsequent
transfer of the money from your aunt and uncle to you (as a
third-party) is a GIFT, and may require that they file a
gift tax return (form 709) if over $11,000. They may have to
file a Form 709A if they elect to split a gift of over
$22,000. You owe no taxes on any amount given to you.

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"Sean B." <kiotieus[at]yahoo.com> wrote

- quote -

Sorry to hear about your loss.

Your aunt & uncle will receive the policy proceeds free from
income tax. If they gift you the insurance proceeds, you
will not be taxed on that gift of money.

They, however, may be liable for filing a gift tax return,
and possibly payment of the gift tax.

It would be best for the three of you to visit a CPA and/or
EA to be clear on things.

--
Paul A. Thomas, CPA
taxman at negia.net

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Sean B. <kiotieus[at]yahoo.com> wrote:

- quote -

My condolences on the death of your mother and sister.

If your aunt & uncle give you the proceeds, each of them can
give you $11,000/year without getting involved in gift tax
issues. If they give you more than that, they must report
the excess on Form 7099, Gift tax decalration, though they
might not have to actuallyt pay any gift tax.

You would not have any income tax to worry about in any
case.

If they wished to avoid the gift tax declaration, it might
be possible for them to disclaim their share of the
insurance policy's death benefit, and then the policy would
be paid out to the policy's contingent beneficiaries, if
any, or if none, according to the law of your mother's
state. That could be paid to her estate, and if you are the
person to inherit her estate, the benefit could pass to you.
No income tax implicaiton for you here either but you need
to ask an attorney who would get the death benefit if your
aunt & uncle disclaimed. And that could involve much more
paperwork.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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My Mother and Sister passed away in a car accident. My
Mother had a life insurance policy with my Aunt & Uncle as
the benefactors. They advised they would have the insurance
company write the check over to me but are now concerned
that they and I will be liable for taxes on the insurance if
it is done this way. So my question is:

Do you pay taxes on life insurance and if so who is liable
for them in a transfer situation?

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