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life insurance taxes

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ghost30

Junior Member
What is the name of your state? Illinois

I worked as a caregiver for an elderly man who passed away last year. When I took care of him he kept telling me that he added me to his will with a certain amount which I will not have to pay taxes on and he put me down as a beneficiary on his life insurance policies. At first I didn't believe him but after he passed away I received a call from his life insurance company that I am the only beneficiary on his life insurance policies. I cashed the policies last year, after that I received a letter from his attorney that I have to pay taxes on the amount I cashed in. Now I was wondering if I have to pay taxes for those insurance policies?
My second question is about a trust he added me to, October last year I have sent two letters to his attorney asking about me being in his trust but I didn't get an answer. This year I had to go through a lawyer to get a partial copy of his trust. After that I received another letter asking for my Social Security number so he can pay the taxes for the amount that I didn't receive yet from the trust. Is his attorney allowed to deduct the taxes from the money I should receive? Can I pay the taxes after I have received the money?
If the trusts are not going through probate, why does it take so long to receive the money and why the executer didn't send me a notice that I am one of the trust beneficiaries.
How can I obtain the full copy of the trust?

I really appreciate any answers I may get.
 


ALawyer

Senior Member
Taxes on Life Insurance

Although the beneficiary of life insurance is not obligated to pay INCOME tax on the receipt of proceeds in MOST circumstances (the major exceptions occur when a life insurance policy is "sold," such as with a viatcal or life settlement), the beneficiary MAY be obligated to share -- generally pro rata -- in the total Federal Estate Tax and/or State Estate or Inheritance tax the estate may bear. The Federal Estate Tax generally applies only if the deceased's estate exceed the threshold applicable at the deceased's death, currently $2 million. The threshold for state taxes vary from state to state.

As to how to get the full trust, and why it took so long to get money from the trust, ask your lawyer. There may be good reasons, or there may have been something sinister going on.
 

Dandy Don

Senior Member
You need your own attorney whom you can ask these questions to.

As far as anyone asking you to pay taxes, anyone asking you to do that needs to send you some type of documentation, such as a letter or other information, that mentions specifically what type of taxes and the amount, etc. Then you need to consult a CPA or tax accountant to get an official examination of whether what you were told is true or not--just don't believe what the attorney tells you just because he says you have to do it--it may not be true.

In the partial copy of the trust you received, did it describe stipulations/conditions on how you were to be paid, did it say how much you were to receive, and do you know if there are other beneficiaries besides yourself?

The term executor applies only to a will. The person who handles a trust is called the trustee. If you have any doubt or questions about what you are to receive from a trustee, send the trustee a certified letter with your questions/concerns.

DANDY DON IN OKLAHOMA ([email protected])
 

ghost30

Junior Member
"In the partial copy of the trust you received, did it describe stipulations/conditions on how you were to be paid, did it say how much you were to receive, and do you know if there are other beneficiaries besides yourself?"

The attorney cut everything out except my name and the amount(wich is in the hundred of thousands) I am supose to receive and yes there are more beneficiaries in the trust.What bothers me is the fact that I wasn't informed about the trust and that lawyer doesn't know anything else but to ask me to pay taxes.
Also I was told that I will inherit some paintings ,wich seemed to vanish.I repeat,I didn't believed my friend x until i received the phone call from his insurance company then I decided to make some inquiries about the will. Mr. x also told me that he added to his will some old friends and coworkers.I did contact all of them and they have no ideea that they are to receive some money from his trust.
Thank you for your help.
 

Dandy Don

Senior Member
In fairness to the trustee, he probably should have notified you sooner but it takes a few months to manage the affairs of the trust and compute taxes. He is not able to guarantee that you will be receiving the full amount you are due from the trust until all bills and taxes are paid, but if there are enough assets in the trust you most likely will be receiving all or most of what you were named to receive. His asking for taxes is somewhat of a red flag, though, because the trust is supposed to pay all federal and state income taxes.
 

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