Is Life Insurance Tax Free To The Beneficiary? 
Yes , life insurance is tax free to the beneficiary . If there are estate taxes due -LRB- right now , federal estate taxes are charged on the excess if an estate is larger than $ 5,250,000 -RRB- , someone will have to pay them , so the beneficiary may be asked to pay a portion of those . Also , if the beneficiary takes the death benefit on a payment plan , they will be paid interest on the money not yet collected , and need to pay taxes on the interest . But in most situations , the beneficiary receives the death benefit 100 % tax free . 