When Is A Life Insurance Death Benefit Taxable? 
One of the best reasons why people buy life insurance is because there the proceeds are not subject to income taxes . There are situations where the benefits can be subject to estate taxes or a certain setup can result in gift tax consequences . The most well-known situation is what 's commonly referred to as the `` Goodman Triangle '' -LRB- named after a court case -RRB- . This is when the policyowner , the insured , and the beneficiary are three different parties -LRB- e.g. a husband is the policyowner , the wife is the insured , and the kids are the beneficiaries -RRB- . When structuring the policy , you want to have two of the three parts being the same person/entity -LRB- e.g. policyowner and insured are the same person and beneficiary is different or policyowner and beneficiary and the same person and insured is different -RRB- . If a policy is owned by a trust such as an Irrevocable Life Insurance Trust -LRB- ILIT -RRB- , the insured and beneficiary will be the trust and the insured will be the person who 's life the trust was created for . I hope the information is helpful - please feel free to contact me for help and if you have any questions . Thanks very much . 