Does life insurance get taxed? 
The beneficiary of a life insurance policy will not have to pay income tax on the proceeds . Furthermore , if the beneficiary is named in the policy , the death benefit will pass to the beneficiary outside of probate . The owner of the policy , or the estate , may need to pay state and/or federal state or inheritance taxes if the estate is large enough -LRB- life insurance proceeds are included in calculating the size of the estate -RRB- . 