Can life insurance policies also be subject to inheritance tax?
September 22, 2023 | 50,00 EUR | answered by Alwin Widmann
Dear tax advisor,
my name is Jessica Hartmann and I am facing a complex situation regarding inheritance tax. My father recently passed away and left me a life insurance policy. Now, I am wondering if this life insurance policy is subject to inheritance tax.
In terms of the situation: My father took out the life insurance policy many years ago and named me as the beneficiary. Now, after his death, I have received the payout of the insurance sum. However, I am unsure if this payout falls under inheritance tax and to what extent I must pay taxes on it.
My concerns are that I do not know how to handle this issue and whether I may have to make high tax payments. I would like to know if I need to declare the life insurance policy in my inheritance tax return and how high the tax burden could be in this case.
Therefore, my question to you as an expert: Can life insurance policies also be subject to inheritance tax and how can I best prepare myself in this situation to avoid making mistakes in the tax return? Are there possible solutions to minimize or avoid the tax burden?
Thank you in advance for your support and advice.
Yours sincerely,
Jessica Hartmann
Dear Mrs. Hartmann,
Thank you for your inquiry regarding inheritance tax in relation to the life insurance policy that your deceased father has left to you. I understand that this is a complex situation for you and that you are concerned about whether the payout of the life insurance policy is subject to inheritance tax.
In general, life insurance policies in Germany are subject to inheritance tax. This means that the insurance payout you received as the beneficiary falls under inheritance tax and you must pay taxes on it. The amount of tax depends on various factors, such as the relationship to the deceased and the value of the life insurance policy.
Regarding the inheritance tax declaration, you usually need to declare the life insurance policy and specify the value of the insurance payout. The tax burden will then be calculated based on the value of the life insurance policy. It is important to be precise and provide all relevant information correctly to avoid potential errors in the tax declaration.
There are various ways to minimize or avoid the tax burden. One option is to seek advice from a tax advisor who can help you take advantage of possible tax benefits and reductions. Additionally, you can consider whether it is beneficial for you to surrender the life insurance policy early or convert it into another form of provision.
It is important that you address the issue of inheritance tax early on and seek professional help if necessary to ensure that you do not have to make unnecessarily high tax payments. I am available to assist you further in this matter and help you optimize your inheritance tax declaration.
Best regards,
Alwin Widmann
