Death Benefit
The amount paid to the named beneficiaries of a life insurance policy when the insured person dies, generally income tax-free under IRC Section 101(a).
Understanding Death Benefit
The income tax-free nature of the death benefit makes life insurance a uniquely powerful wealth transfer tool. In an IUL policy, the death benefit can be structured as a level amount or as the face amount plus accumulated cash value. For estate planning purposes, life insurance death benefits paid directly to named beneficiaries typically bypass probate.
Why This Matters for Retirement: Understanding Death Benefit is essential for making informed decisions about tax-free retirement income strategies. Whether you are evaluating an IUL policy, planning Roth conversions, or comparing retirement vehicles, this concept directly affects your outcomes.