In its recent article about life insurance payouts, the popular financial platform MoneyGeek chatted with financial expert and partner at WRP Wealth Management, Aaron Rubin. Aaron helped shed light on the taxability of life insurance proceeds. He explained that while most of the time, life insurance payouts are tax free, there are a couple of situations in which benefits are taxable.
One of these situations is when a business pays the premiums for a life insurance policy as part of its succession plan. In this case, the premiums could be deducted as a business expense, and the payout would then be counted as taxable income for the business.
The other scenario is when the life insurance benefit pushes the deceased person’s estate over the estate tax exemption limit. In 2024, this limit is close to $13 million, which means that it affects very few taxpayers. Aaron cautions, however, that the exemption limit is set to be cut in half in 2026. Any estate value that surpasses the limit would be subject to a 45% federal estate tax, making careful planning critical.
With more than 20 years of experience in the financial industry, Aaron Rubin has become a leading voice in personal wealth management. He specializes in helping startup professionals manage the complex tax and financial planning implications of equity compensation, including structuring estate plans that minimize or eliminate estate tax liability.
MoneyGeek is a prominent financial information platform that offers unbiased advice and insights to help individuals make informed decisions about their finances. With a team of financial experts and researchers, MoneyGeek provides comprehensive, up-to-date information on a wide range of financial topics.
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WRP is a team of tax and financial management professionals with expertise in company-issued stock options. We use research-based investment strategies to grow and protect our clients’ investments and a personalized, one-on-one approach to understand each individual’s goals and priorities. A proud Bay Area business, we are dedicated to local philanthropy and contribute time and resources to local charities to support our community’s long-term well-being.