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Question for the Money Doctors

Question submitted on Feb 2, 2015.

Question

I recently found out that there was a insurance policy on deceased mother. When she had passed insurance co. said that there was no policy. Recently proof was found and the policy had accrued $6,000.00 in interest. Do I have to pay taxes on the interest that accrued?

Answer

Life insurance proceeds paid to a beneficiary are normally tax-free.  If there is a span of time from the date of death until the funds are actually remitted, then interest will often accrue on the amount of the benefit.  This interest is considered taxable income.  You will probably receive a 1099-INT.


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