My brother is named as beneficiary on my Mom’s policy so he can pay her remaining bills as needed and then pay out myself and his other siblings. Assuming he does this any money I receive from his beneficiary payout would be taxable correct? Thoughts?
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No. Life insurance proceeds are NOT taxable!
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Person a is beneficiary giving part of the proceeds to Person b. Is person b taxed?
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Money from life insurance is not taxed. Will your brother be honest and divide the money fairly between the siblings? It might be best to split the money between the siblings, but give your brother a bigger share to help pay the bills. You could also set up an arrangement where you’re legally the person who gets the money.
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Yes, if your brother gives you the money, it’s taxable if it’s over the gift limit. Only the beneficiaries can receive the money tax-free.
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In 2024, you can give away up to $13.6 million under the lifetime gift exemption without anyone having to pay taxes, so most people don’t need to worry about it.
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No, death benefit proceeds are generally not taxable. Your brother would receive the proceeds tax-free. As long as there’s no estate tax liability, the gift wouldn’t be taxable, and he could then gift a portion of the death benefit to you. The person receiving the gift doesn’t pay taxes anyway. But as the policy beneficiary, he has no obligation to share the proceeds with anyone.
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Good news is that it’s not more than 50,000 and odds are it will have to be surrendered if Mom stays too long in nursing home and goes on Medicaid. So bro has at best 50/50 odds