Is Life Insurance Federally Taxable? 
Life insurance is federally taxable if the sum of the life insurance proceeds plus the value of the estate -LRB- Gross Estate -RRB- exceeds the federal estate tax guidelines . This year , $ 5,250,000 is exempted from estate taxes . If your estate is larger than that , you may want to transfer ownership of your life insurance to an Irrevocable Life Insurance Trust . 