Is Life Insurance Subject To Inheritance Tax? 
One of the great things about life insurance is that the death benefit in NOT taxed when paid to a beneficiary that is a person . That is when the beneficiary is NOT an estate , which may then be distributed to beneficiaries . If the death benefit goes to an estate and is then distributed , then it may be taxed as inheritance or may be subject to estate tax if the total estate exceeds the threshold for estate tax . Typically death benefit paid to individuals are not considered as income or inheritance for the purposes of taxation . 