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Are you concerned about tax on your life insurance?

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We’re often asked by people who are considering taking out life insurance if their beneficiaries would be taxed on the benefit. It’s not surprise that this is a concern for those undertaking estate planning – after all, an inheritance isn’t always so grand if the heir or beneficiary has to sell a property, for example, in order to pay tax. However, in PA, life insurance that is paid directly to a beneficiary isn’t normally subject to inheritance tax.

Still, when you’re planning your estate, it’s wise to consider the tax issues and the needs of your heirs or beneficiaries. It’s also vital that you keep some vital details up to date – your address, and the details of your nominated beneficiary. You should also ensure that your lawyer, beneficiary, or another trusted individual (or two) knows that you have the life insurance policy
in place, and where to locate the details.

Not being diligent in this regard can have unfortunate consequences: a beneficiary who doesn’t know about the life insurance policy may not think to ascertain if there is one; and failing to change the details of the beneficiary (for example, if the original individual passed away, or was no longer part of your life) can make things quite difficult.

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