Is Inherited Life Insurance Taxable? 
Inherited life insurance is not taxable for income tax , in most situations . However , if the amount of the life insurance proceeds caused the estate to exceed the limit for exemption from state or federal estate taxes , the estate taxes will need to be paid by someone . Sometimes the policyholder will express in his/her will if the beneficiary is to help contribute to the payment of estate taxes . If there is no will , the laws of the state in which you reside will determine if you have to contribute to the estate tax payment . 