Income tax on life insurance claim?

Nov 26, 2014 2 Replies
T

My wife got a check today for her mother's life insurance. It was a $1,000 policy taken out in 1952.



Face Value of Insurance $1,000 Accumulated Dividends and Interest $6,391 Termination Dividend $ 34 Postmortem Dividend $ 7 Interest from Date of Death $ 11



So what part of this will be on our 1040?


From what I have read (which tends to be about half right...) dividends are not taxable, and interest should have been taxable in the year it was earned by my MIL. That would leave the $11 interest. Is that right?

Thanks much.

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A

My condolences on the death of your mother in law.

Yes, this should cause the life insurance company to send her a form 1099-INT for $11. But the 7 may or may not show up too, and would be taxable if dividends exceed total oremiums paid and amounts reinvested, whether they put it on a 1099 or not.

If the other dividends exceeded the total premiums paid and amount reinvested, the diference is also taxable dividends.

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T

So I should just do whatever 1099INT and 1099DIV say?

I understand about the dividends being taxable in the amount they exceed the premiums, but that should have occurred as the dividends were earned, rather than when they are paid out? Or will that just be clear from 1099s?

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