Will The IRS Get It Before I Do?

Crystal's dad passed away and left the IRS with debt and his wife with life insurance money. What happens here?

QUESTION: Crystal’s mom has a life insurance policy on her dad, and he owes $300,000 to the IRS. She is the beneficiary of the policy. If something happens to him, can they take the life insurance money?

ANSWER: No, unless she signed a joint return at the time the tax was levied. If it’s just his tax, the IRS will come in and file a claim against his estate, but that’s only the property he owned. The life insurance proceeds don’t go into the estate.

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