Revocable Living Trust

[EGreene21]

I have an insurance policy that has my sisters listed as beneficiaries and also our trust, so that the money given to the trust can be used to pay off mortgage debt in the event I pass away. Will the money the trust receives from the life insurance be taxed as income? And will my sisters portion still be received tax free? 

[tagteam]

Proceeds from life insurance policies are generally not taxable and not included in gross income.

See https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insuranc...

[EGreene21]

So even then if a trust receives the money from the life insurance policy, the trust does not have to pay income taxes on it? 

[tagteam]

Correct, with regard to the life insurance proceeds.