Capital life insurance

Forum|Forum|5 years ago
March 25, 2021
2 replies
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Over 20 years ago my mother took out a capital life insurance in her name in Germany with myself as beneficiary. She paid the annual premium. The insurance matured last year. I got a lump sum payment last year transferred from Germany. Do I have to pay tax on this money or is it considered a gift from my mother? If I have to pay tax how to I report it (which section)?

MaryK4

Level 15

No, generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them.

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Gibbon13Author

Level 2

Thanks MaryK1101 for your answer. Just to clarify one point. My mother is still alive. The lump sum was paid because the insurance was linked to annual pension or lump sum payment at the maturation date. Would this make a difference?

macuser_22

Alumni - Champ

@Gibbon13 wrote:

Thanks MaryK1101 for your answer. Just to clarify one point. My mother is still alive. The lump sum was paid because the insurance was linked to annual pension or lump sum payment at the maturation date. Would this make a difference?

That does not add up. A "benificuary" is only paid after the death of the account owner. If the account owner is alive then the payment must go to the account owner. Seems like a mistake was made. The payer should be contacted.

Perhaps German law is different.

A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name: One person. Two or more people.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

SundayInSalem

Level 8

It sounds like your question was misinterpreted. You said the policy matured. Generally the amount of money received from the surrender of a life insurance policy is taxable to the amount it exceeds the amount of premiums paid. Refer to Situation 1 in Rev. Rul. 2009-13.

If you received the proceeds directly then you would have to calculate whether the amount received exceeded the cost of premiums. If your mother received the proceeds and gave them to you it is a gift.