tax treatment of life insurance payments: The death benefits of a life insurance policy are exempt from taxes. Even with recent tax-rate reductions and a phased-in increase in the amount of a personÆs estate that is exempt from estate taxes, the tax-free nature of life insurance benefits makes them a powerful financial planning and wealth-preservation tool. Annuity payments are not tax exempt, although these products may include insurance “wrappers” with exempt benefits.
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