Who Pays Estate Tax On Life Insurance? 
The estate tax is a tax on the transfer of wealth at death to one 's heirs . The estate tax is due within nine months . The amount of an estate exempt from this tax is quite high right now - $ 5M indexed for inflation -LRB- $ 5.25 M in 2013 -RRB- . Thus very few estates -LRB- less than 1 % -RRB- actually pay an estate tax . In most cases , people buy life insurance to provide cash at death to pay this tax instead of liquidating other estate assets . If life insurance is held outside the taxable estate , it wo n't be subject to estate tax on the proceeds . 