Life Insurance Payout and Estate Taxes

Reader Question

When I die and my life insurance policy pays out to my family…how will that be taxed?

Jenny,

Canyon Lake, Texas

I found this excerpt about your question Note: Under the current federal law, beginning in 2011, estates over $1 million will be subject to the federal estate tax with a maximum tax rate of 55 percent. Note there is a deduction against income for estate taxes paid. A good estimate of the net total percentage paid in taxes at the top brackets is 70%.

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