Also, if you take a life insurance policy loan, the loan generally isn't taxable as long as the policy remains in force and the loan amount doesn't exceed the amount of policy premiums paid. However, interest earned on the proceeds may be taxable, and tax rules can get complex if the policyholder surrenders the policy for cash. Life insurance policy proceeds received by a beneficiary after the policyholder's death are generally tax-free. Meanwhile, as of 2023, twelve states and the District of Columbia levy an estate tax. Note: Not to be confused with inheritance tax (which is levied on the heirs of the deceased), the limit for the federal estate tax (levied on the estate) is quite high (i.e., $12.92 million for 2023 and $13.61 million for 2024), so most taxpayers can avoid the tax.
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