Legal Question in Wills and Trusts in Arizona

Re: life insurance taxation

The parents may make a joint gift of $24,000.00 of the insurance proceeds in any one year without incurring tax liability. More than that may be taxable or chargeable against their gross unified estate tax credit. The parents should consult a certified tax professional to determine exactly what their options are, as this answer concerns the federal tax code only, and not AZ law.

Re: life insurance taxation

If the life insurance has not been paid out yet, then the parents may be able to "disclaim" the proceeds. Essentially, the parents tell the life insurance company that they will not accept the money. In that case, the proceeds will *probably* be paid to the decedent's estate. *Presumably*, the decedent left his estate to his wife, therefore she would get the money and there would be no tax consequences to the parents.

HOWEVER, I have made several assumptions here. You MUST review the insurance policy and the decedent's Will. I strongly suggest that you see an attorney BEFORE you do ANYTHING. Time is of the essence. Act quickly.

Re: life insurance taxation

Not enough facts are known.

Who is the beneficiary of the policy?

How much is the death benefit?

Did the decedent have a will or trust?

Who is the beneficiary of the decedent's will or trust?

What is the gift/estate tax standing of the parents?

See an estate attorney. Disclaimers must be done within a limited period of time, so do not delay. Proper factual and document background is needed to respond properly to this question. I do not disagree with the other answers you have received, but there are other issues as well. Good luck.