Life Insurance and Taxes Texas TX
Reader’s Question:
My uncle from Texas designated me and my sister as his beneficiaries in his life insurance policy. He died a single man. I want to know how much taxes should my sister and I expect?
Spencer
Houston, TX
Spencer, this will depend on how you got your designation as beneficiary. Were you and your sister designated as primary beneficiary in his life insurance policy, or were you designated to inherit his properties and incomes, including insurance policies, through a will?
The manner of how you were designated will make a very big difference because Texas laws subjects the estate of the deceased with what they call the estate and inheritance tax. If your uncle left a will stating clearly that he wishes you to have the life insurance money, then I suppose no other next of kin can contest to you receiving the money coming from life insurance claims as long as you and your sister are those written as beneficiaries. If it is clear that you really are the beneficiaries, then you can go ahead and make the claim.
However, if you were designated in general to be the custodian of his estate, then the state will record everything your uncle owns, and those will be subject to tax. The same also goes for when your uncle left no will and you and your sister are the only next of kin. This will also leave everything to his estate and are also subject to have tax deductions.
So, Larry, usually insurance policies protect the listed beneficiaries. It is only when contradictions between the will and life insurance policy appear that court mediation will be needed.
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