Summary of H.J.Res.88 - 114th Congress (2015-2016): Disapproving the rule submitted by the Department of Labor relating to the definition of the term Fiduciary. Loc.gov
If my clientâs policy matures prior to the insuredâs death, the policy will typically pay out its cash value. How will this sum be taxed? If the policy matures prior to an insuredâs death, it ceases to be life insurance and is treated as a taxable distribution. As such, the cash value will be taxed as ordinary income to the extent it exceeds the taxpayerâs basis into the policy (i.e., the sum of after-tax premiums) .
The grantor of the trust is not personally liable for income taxes on trust income; the tax liability belongs to the trust itself. The variation in income tax brackets also allows you to move assets to a trust that enjoys a lower tax rate. If the irrevocable trust includes a life insurance policy, then the benefits paid to your beneficiaries after your death are not subject to federal income or estate taxes.