# Estate Tax on Life Insurance Death Benefits



## miky348 (Sep 23, 2010)

Hi,

Policy type: Life Insurance
Issuer: New York Life (policy issued through NYL's New York office, i.e. its a USA policy)
Owner: Myself (Citizen: Canada; Resident: UAE). I do have "incidents of ownership" in the policy
Beneficiary: My brother (Citizen & Resident: Canada)

Questions:
1. Will the Death Benefits be subject to USA Federal/State Estate Tax?
2. If Yes, how to avoid Estate Tax?

Thanks
Miky


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## Nononymous (Jul 12, 2011)

Don't know, but remember that the US estate tax only kicks in after $5 million, so it would have to be a very large insurance policy.

On edit: ignore the above, based on the what's in the other thread. I forgot about the NRA angle. But also, no idea if insurance payouts would be considered taxable.


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## miky348 (Sep 23, 2010)

Nononymous said:


> Don't know, but remember that the US estate tax only kicks in after $5 million, so it would have to be a very large insurance policy.


It is my understanding that the Estate Tax Exemption ($5.49m) is only available to USA citizen/resident. To all non-citizens/non-resident the exemption is only $60,000

What Is the Estate Tax Exemption for 2017? | Cipparone & Zaccaro
https://www.worthpointeinvest.com/u-s-estate-and-gift-tax-traps-for-non-u-s-citizens/

Like to hear what others have to say.

Thanks


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## Bevdeforges (Nov 16, 2007)

Generally speaking, life insurance (in the US sense of the term) is usually outside of any estate tax considerations. Generations of Americans have purchased life insurance in order to pay for estate tax so that the underlying assets don't have to be sold to pay the taxman. 

I would check the IRS website for whatever publications they may have on life insurance. But as far as I know, the payout from a life insurance policy isn't normally included in the estate of the deceased. 

You could probably ask the insurer about this. That is, after all, a big selling point for life insurance in the US.
Cheers,
Bev


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## JustLurking (Mar 25, 2015)

miky348 said:


> 1. Will the Death Benefits be subject to USA Federal/State Estate Tax?


_JPM Financial Services_ has published this rather dense but nicely reliable paper that lays out most of what is, and is not, at risk of US estate taxes for NRAs, complete with cites for the relevant tax code sections or regulations. It covers your life insurance question.

Based on the details given, it looks like the answer is No.


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