In Pennsylvania, life insurance proceeds are exempt from PA inheritance tax when the policy is on the life of the decedent. Beneficiaries will also not be required to pay taxes on the proceeds as it pertains to income tax.
Life insurance is one of the few assets exempt from taxation when it comes to PA inheritance tax. This is why it is often recommended to individuals that they invest in life insurance.
Policies can be set up to avoid the probate process all together, by naming direct beneficiaries on the policy, with the proceeds being paid directly to the assigned individuals upon the death of the decedent. It is always a good idea to name both primary beneficiaries and contingent beneficiaries when doing so, that way there is always a backup.
Life insurance is often part of our discussions during an estate planning consult, in which we can offer more individualized guidance on choosing these policies and ensuring beneficiaries are named correctly to avoid any disputes in the future.
If you have any questions about the topic discussed in this article, or any estate law matter, please give us a call at Bononi & Company 724-832-2499.