IRS Publication 559 — Survivors, Executors, and Administrators

The proceeds from a decedent's life insurance policy paid by reason of the decedent’s death are generally excluded from income. The exclusion applies to any beneficiary, whether a family member or other individual, a corporation, or a partnership. Veterans' insurance proceeds. Veterans' insurance proceeds and dividends aren't taxable either to the veteran or to the beneficiaries. Interest on dividends left on deposit with the Department of Veterans Affairs isn't taxable. Life insurance proceeds. Life insurance proceeds paid to a beneficiary because of the death of the insured (or because the insured is a member of the U.S. uniformed services who is missing in action) aren't taxable unless the policy was turned over to the recipient for a price. This is true even if the proceeds are paid under an accident or health insurance policy or an endowment contract. If the proceeds are received in installments, see the discussion under Insurance received in installments, later. Accelerated death benefits. A beneficiary can exclude from income accelerated death benefits received on the life of an insured individual if certain requirements are met. 18 Publication 559 (2025)