Does Life Insurance Get Taxed At Payout? 
The death benefit from life insurance is usually paid out tax free if it is paid directly to the beneficiary -LRB- s -RRB- . If it goes through the estate -LRB- no human beneficiary named -RRB- it will usually be taxed . If you are planning a larger estate , you will want to involve an estate planning attorney , a life insurance agent and a CPA as your advisory team . There are certain situations where you may be taxed if you do not plan well . A big advantage of whole-life insurance is that you can also use it for tax free income before you die . Life insurance is one of the most tax favorable money management tools you have available . 