Estimated Income Tax Savings

Based on the inputs, the estimated potential federal income tax saved by the beneficiary could be around:

$0.00

(This assumes the death benefit would have been taxed at the illustrative rate if not received as life insurance proceeds.)

General US Federal Tax Rules for Life Insurance

• Tax-Free Death Benefit: Generally, the death benefit paid to beneficiaries is not subject to federal income tax.
• Tax-Deferred Cash Value Growth: Cash value in permanent policies (like Whole Life, Universal Life) typically grows tax-deferred. Income tax is usually only due if the policy is surrendered for more than the total premiums paid (cost basis) or if certain withdrawal/loan rules apply.
• Policy Withdrawals: Withdrawals are generally income tax-free up to the policy's cost basis. Amounts withdrawn above the basis are typically taxed as ordinary income.
• Policy Loans: Loans taken against the cash value are generally not considered taxable income, provided the policy stays in force and is not classified as a Modified Endowment Contract (MEC). Unpaid loans reduce the death benefit.
• Estate Tax Consideration: While usually income tax-free, the death benefit may be included in the deceased's taxable estate if the deceased owned the policy or had 'incidents of ownership'. Estate tax applies only if the total estate value exceeds the federal estate tax exemption limit (which changes periodically).
• Premiums Not Deductible: For individuals, life insurance premiums are generally considered a personal expense and are not tax-deductible.

These are general rules and can vary based on policy type, state laws, and individual circumstances. Consult with qualified professionals for specific advice.