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The reason: Life insurance proceeds aren't included in your estate if held by a trust.
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If the spouse is unaware of the buy-sell agreement and has not consented to it, there is the risk that the payout of the life insurance proceeds will be disputed.
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Life-insurance proceeds, gifts and inheritances are also not subject to the tax, nor are appreciated assets donated to charity.
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That suit sought to recover life insurance policy proceeds for the families and heirs of the millions who lost their lives in the Holocaust, many of whom had purchased life insurance policies.
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Because life-insurance proceeds at death aren't subject to this tax, a taxpayer could buy a policy, borrow from it and settle up at death, avoiding income tax on investment gains within the policy.
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Allianz is one of seven European insurers named in a law suit, filed recently in New York by victims' heirs, seeking the proceeds of unpaid life-insurance policies.
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In some limited instances, a life insurance policy may be paid out prior to death and those proceeds are excluded from income.
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