Is life insurance subject to federal estate tax?
If you die owning a life insurance policy, the proceeds go into your taxable estate. But there is no federal death tax if your estate is worth less than $1,000,000 for 2002; if your estate goes to your spouse; or if, before you died, you gave the policy to someone else, like your children in a trust. (But the proceeds will be taxed to your estate if you die within three years of making the gift.) State inheritance taxes may be due on estates worth less than the federal estate tax thresholds.
