Generally, life insurance proceeds are not subject to income tax. And even in the odd case where they were taxable, the relationship of the beneficiary to the policy owner and/or insured is not relevant.
If the deceased is the owner of the policy, the proceeds would be included in the gross estate upon which the federal estate tax is based. Whether a federal estate tax is due depends on: 1) the value of the entire estate; and 2) what the estate tax law looks like when the owner passes away. We can't guess at #1. And #2 is up in the air right now. The betting line seems to favor the exclusion of the first $3.5 million from estate tax.
