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) .
Exception #1 â Taxing Interest Gained On Life Insurance Pay-Outs. Life insurance can be paid as annual payouts instead of a lump sum. In this situation, some life insurance companies will pay interest to you while they are holding the balance of the death benefit pay-out. Interest is considered to be income by the IRS anytime it is earned. If you gain any interest on the payout of your life insurance, this amount is taxable.