Insurance indemnities are subject to inheritance tax or income tax
If an insurance company pays you an indemnity relating to a life insurance contract or to an individual retirement contract, etc., you must enter the amount you receive in the deed of estate inventory. You must pay inheritance tax or income tax on such an indemnity, depending on the type of insurance contract and depending on whether you were the decedent’s close relative.
The insurance company’s decision to pay you the indemnity contains important information on how your indemnity income will be taxed. Take the letter from the insurance company with you to the meeting where the inventory of the estate is drawn up.
If you are not informed of the insurance indemnity until after the deed of estate inventory has been sent to the tax office, you must send us a photocopy of the insurance company’s decision later. Send the document to the same address where the deed of inventory was delivered.
Insurance indemnities may sometimes be paid to the estate itself, not to the surviving heirs.
How to list an insurance indemnity in the estate inventory deed
Add a new heading to the deed of estate inventory, such as “Insurance indemnities received because of the decedent’s death”.
Enter the following information:
- the clause of the insurance contract on who the beneficiary of the insurance is
- the recipient of the indemnity
- the insurance company that paid the indemnity
- policy number or other details for identification of the policy
- the amount
- the date of payment (if known at the time when the estate is inventoried)
Do not list the insurance indemnity under the deceased person’s assets in the deed.
Enter the indemnity under the deceased person’s assets in the estate inventory deed.
The deed must also contain the following information:
- Indicate that the indemnity was paid to the estate.
- State the name of the insurance company that paid the indemnity,
- The policy number or other details for identification of the policy or contract,
- The amount,
- The date when the insurance company pays the indemnity to the estate, if it is known when the estate is inventoried.