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) .
When you die, your life insurance death benefit is added to the value of your estate. If it is over the estate tax limit, the money is taxable. Your life insurance money, if tied up in a permanent policy, can be taxable during your life. Some permanent policies build up cash value that you can pull from while you are living. At the beginning, this money comes from your premium payments. However, the insurance company invests this money and it grows over time.