about tax on Life insurance

[SDRainbow]

My husband passed away last month with age 58 and he worked until July this year. I will receive life insurance from two different company. One is through health insurance under my husband work and the other one is just a life insurance company he personally paid monthly. Question 1) These two Life insurance will be tax free to receive? 2) If I chose to receive this money as a monthly payment, it'll be taxed? 3) If I use this money to pay part of mortgage, is there any tax drawback for me? thank you   

[AR_CPA2]

Hello SDRainbow, 

I am so sorry to hear about your loss!

Life insurance proceeds are not usually taxable and you don't need to report.  If you chose to receive this money as a monthly payment, then the portion representing the growth will be taxable.  If you use this money to pay part of your mortgage, the only small drawback is that you may not have that itemized deduction for the Mortgage Interest.  If the deduction was not enough for you to itemize, then it doesn't matter. 

[SDRainbow]

My husband retirement money will be passed to me as well. If I rollover these money to Beneficially (Inherited) IRA and distribute some amount each month with something like 5yr rule or 10 yr rule, I will owe some tax on it?  I am in the low income bracket. Thank you.

[AR_CPA2]

Hello again SDRainbow,

For any distributions you take from the retirement accounts, part or all could be taxable.  Depending on your tax bracket and the amount of distributions, you may want to have them take out the withholding for federal and state taxes.   The rollover amounts will not be taxable in the current year, only what you take out as distributions will be taxable.