Life Insurance Estate Tax: Taxing Your Legacy

Estate taxes aren’t something we usually worry about–after all your estate needs to be worth more than the exemption amount in order to be federally taxed: the exemption amount for 2014 is a whopping 5.34 million. While this is a high number for many, it’s not the only kind of estate tax. Many states include a state estate tax, including Massachusetts, and any estate over 1 million is taxable. While even 1 million seems like a lot of money, there’s one thing that may tip your estate over this limit: your life insurance payouts. While the intention of your policy was to safeguard your loved ones, the payout from the policy might increase the holdings of the estate so much that it become vulnerable to estate taxes. [Read more…]