Do you have to pay taxes on money inherited from a life insurance policy in Illinois?

You don't inherit money from a life insurance policy (per se). You're the beneficiary of a life insurance policy and as such there is no tax to the beneficiary of a life insurance policy. If the money gets paid to the estate and you inherit money from the estate then there could be an inheritance tax on the policy.

It depends on the exact circumstances.

Normally, you don't "inherit" life insurance money, UNLESS that money was paid to the estate of the deceased - and then taxes are due on that money if the estate is subject to estate taxes, so YES. To INHERIT something, means to get something from the estate of the deceased person. Most life insurance isn't set up to pay the estate of the deceased.

But if the money was paid directly to you, as beneficiary, the money is tax free to you.

So you didn't give enough information for an exact response here . . .maybe you should go back to those two accountants and be way more specific - or get more detailed answers from them than "yes" or "no".

You don't "inherit" a life insurance policy. You're a beneficiary. The vast majority of the time, it's flat out, not taxable income.

If you receive a lump sum amt. on a life insurance policy and give some amt of that money to someone else, is there a tax amt that has to be paid?

I might suggest that you try this web page where onel can compare quotes from different companies: http://insureforeverybody.info/index.html?src=5YAy...

RE :Do you have to pay taxes on money inherited from a life insurance policy in Illinois?

One accountant no and another accountant said yes.

Serious replies only please.

Update: Thanks for the clarifications! I'm asking on behalf of friend and I'm using the wording provided.

Reworded -- Do Illinois life insurance beneficiaries have to pay taxes on the policy payout?

So far, it sounds like the consensus is no, but that there may be exceptions. If anyone has details on the exceptions, please provide them. Thanks!

3 following 6 answers

Life insurance proceeds are not taxable. Also, they pass on to the beneficiary outside of probate. Cannot be used to satisfy debts of the deceased unless the beneficiary is co-owner of the debt.

But if the beneficiary named is the estate of the deceased (and not an individual), then the proceeds can and will be used to pay off the debts of the deceased and is taxable as part of the estate.

My mom paid no tax on my dad's policy.

Not income.

I think to you can help to understand with this point in question <a href="http://site4seek.com/56654/0/1100111/20/loans.html...