Are Insurance checks paid to an estate via unclaimed funds taxable?

My Aunt died in 1998. She was unaware of a life insurance policy that her late husband purchased. Her estate was resolved of all activity by teh year 2000. As the executor of the estate, I was notified in 2015 (by an assets locator) of unclaimed funds (John Hancock policy) via the Pennsylvania Dept. of Treasury in her name. The check is now in my possession. Her will does have a beneficiary for the life insurance policies. Before I distribute the funds to the beneficiary, I need to know if there are any tax liabilities.

Estate Planning, Taxes, Life Insurance
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July 2016

Generally speaking, life insurance proceeds are income tax free. If the estate was large and estate taxes were due on the value of the estate, and money is owed, then the life insurance proceeds might need to be used to satisfy any estate taxes owed. 

The beneficiary listed on the life policy supersedes what the Will dictates as well.

If the life insurance was owned by an irrevocable life insurance trust and not by an individual, it might not be counted toward the total estate value.

If a lawyer was involved in settling the estate you may want to reach out to them to make sure the estate wasn't subject to any estate tax.

Good luck

July 2016
July 2016