Been in the industry for awhile but never thought about this issue until a recent discussion with 2 other insurance agents about a case I have. I don't know the answer to this.
The case:
The insured: Peter J. (Dad)
The owner: David J. who pays and own this policy. (Son)
Beneficiary: David J. (Son)
When/if upon the death of the insured, Peter. David gets the Death Benefit since he's the policy owner and policy beneficiary.
Me: I always assume that the Death Benefit pay out will be Tax Free since David is the owner and beneficiary.
Two Agents I know disagree with me: They said that I am wrong. They said that the Death Benefit is Taxable because since the insured is not the owner, it creates an investment type situation were the death benefits becomes taxable.
Who is correct?
The case:
The insured: Peter J. (Dad)
The owner: David J. who pays and own this policy. (Son)
Beneficiary: David J. (Son)
When/if upon the death of the insured, Peter. David gets the Death Benefit since he's the policy owner and policy beneficiary.
Me: I always assume that the Death Benefit pay out will be Tax Free since David is the owner and beneficiary.
Two Agents I know disagree with me: They said that I am wrong. They said that the Death Benefit is Taxable because since the insured is not the owner, it creates an investment type situation were the death benefits becomes taxable.
Who is correct?