Advanced Underwriting Consultants

Question of the Day – February 13

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: Are life insurance death benefits included in the taxable estate for Pennsylvania inheritance tax purposes?

Answer: Not any more.

Here’s what the Pennsylvania Inheritance Tax Code says:

§ 93.131. Payments from employment benefit plans and life insurance contracts.

(a)  Scope and application. The purpose of this section is to establish rules relating to the circumstances under which payments received from employment benefit plans and life insurance contracts are subject to the inheritance and estate tax.

….

Life insurance contracts—A contract possessing features of risk shifting and risk distribution, between the holder of a policy and an insurance company under which the company agrees, in return for the payment of premiums, to pay a specified sum to the designated beneficiaries upon the death of the insured. For purposes of this section, a life insurance contract does not include a matured endowment policy or a policy where the decedent’s only rights, at the time of his death, were to receive a refund under the policy.

(c)  Life insurance contract.….

(2)  For the estate of a decedent dying on December 13, 1982 and thereafter. Payments received from a life insurance contract are exempt from the inheritance tax whether they are paid to the estate or some other beneficiary.

The last bolded section is clear—life insurance death benefits are exempt from the inheritance tax.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.