When it comes to life insurance, a lot of people lack proper knowledge. Times when you lose a loved one can be extremely overwhelming, and grief is not something that appears one day and goes away the next, we must deal with it in our way until we’re ready to say goodbye to that person.
If the person who recently passed away had life insurance, then you must know how to handle procedures properly.
For starters, the information contained in this article will solve some of the most common doubts that people have about life insurance in Ohio. While this is one of the most common issues that people have to deal with every day, not everyone is well informed about it, and helpful information isn’t available in most of the websites.
Most people don’t take into account that many individuals aren’t able to reach their insurance agent, which can bring lots of problems to the process.
First of all, to be eligible for life insurance in Ohio, you must be a permanent employee exempt either full-time or part-time, while at the same time; you must have worked to the State for a whole year, without interruptions, which means that you must’ve done it continuously.
All life insurance in Ohio is processed through Securian Financial, which means that you should probably get in touch with your insurance agent as soon as you can.
This will make you able to get the benefits sooner, so you can ease things for your family, at least for a while.
To file a life insurance claim in Ohio, you must be aware that you’ll need to gather some information, as well as some documents. Of course, at this point, you should’ve already acquired the death certificate.
The process itself isn’t that complicated, and it will most likely be completed in a few days if everything goes well. During this complicated time, it is best if you get assistance, just so you don’t get more unnecessary stress.
More information about how to do a life insurance claim can be found in this article.
This being said, other of the questions that might pop into your mind is: Are life insurance benefits taxable in Ohio? And the answer to that question is, yes, they are.
Life insurance makes your beneficiary able to claim a determinate amount of income (which in Ohio, is worth a whole year of work) once you pass away. Once the person designated as an heir gets the money, they can expect to be free of income tax.
There are some cases where this doesn’t apply though, the first one being when it comes to a single person. If the estate of a single person is more than $5.4 million, the total amount will be taxed as part of the state. The same thing happens to married couples whose estate is equal to or more than $10.98 million.
There are some other terms that you should be familiar with while we’re talking about if life insurance benefits are taxable. In Ohio (and many other states), there’s something that goes by the name of “incidents of ownership”.
This term is used to those ways that you take advantage of to gain control of your insurance policy, and include actions such as a change of beneficiary, cancellation, borrowing against it, pledging and/or the policy being assigned to another party.
Other information that you must take into account is that, according to the Internal Revenue Code §2042, are subject to estate tax those processes related to life insurance that are payable to your estate subject.
However, if you reunite the proper conditions, this won’t become a problem and will most likely be forgotten. These conditions include having an estate so small that doesn’t overcome your total lifetime estate, as well as your gift tax exemption.
This is some data that no one can be sure of, as the future is uncertain for all of us, that’s why, at least in Ohio, you can avoid the total amount of your life insurance policy becoming subject to tax by following the advice that we’re going to provide to you.
How much money will be taxable from my total life insurance?
This information might be a bit hard to process, so we’ll put it very simple. Unfortunately, Ohio is one of the states across the country that might put into tax the total amount of your life insurance.
However, with proper planning, this can be avoided. For starters, a state inheritance tax will be applied to your state if:
Your total amount is between $338,333 and $500,000. In this first case, you will be charged with 6% over the excess of the total amount, plus $13,900.
The second case works only when your estate exceeds the amount of $500,000, and the amount you’ll be charged with will be higher as well. In this case, a total of $23,600 will be charged, as well as a 7% over the excess of the total amount.
However, if there’s one thing that you can be sure of, is that the proceeds related to a life insurance policy are not taxable by any means. If the total amount of the policy is added to your estate somehow, then it will become taxable.
These kinds of proceeds are constantly changing, so you must be aware of their current state during the time you’re planning to claim the life insurance.
Remember, to solve a problem, information is the key. Most people think that getting life insurance is an easy task, and it is, but it can become a bit hard for those who aren’t well informed about it. Many things can go wrong as well, such as the life insurance policy becoming taxable.
This is more common than you think because most people do not plan this thoroughly. This post intends to educate you and bring you useful information regarding how life insurance proceeds are handled in The State of Ohio.
Ways to avoid inheritance taxes in Ohio
The first way to avoid the benefits of your life insurance income from becoming taxed is to transfer ownership of it to a different person. This might seem a bit ‘easy’ at first, but there’s a catch, and you must get to know how to do this properly to make things right. There are some steps that you need to follow so this comes out right:
Choose a person of your trust to become the new owner. Remember, once the ownership has been transferred, there’s no way back, so the person you choose should be a responsible individual.
The chosen person should be aware that they must pay the premiums of the policy in time. As we’ve told you above, this person should be a responsible individual; otherwise, you’ll be in risk.
If you have a good feeling that this might work out, then you should be in contact with your insurer when possible, so you can start the correct proceedings.
It is recommended to get some assistance from an estate planning attorney if you have decided that this way may work for you.
The second way of avoiding your life insurance money from becoming taxed in Ohio is by placing it in an irrevocable life insurance trust, or ILIT. With this being said, you should be aware that an ILIT awards you with more control of the whole proceeding.
For example, with an ILIT, if you want to give the life insurance to minors, then you can choose a trusted individual to manage the funds until they become able to do it themselves.
Both options can work pretty well if they are planned with anticipation, however, the way you choose is solely up to you. You should act how you think is best not only for you but also for those who will become heirs of the policy. If you want the heirs to enjoy all the benefits that come with life insurance, then you shouldn’t put your estate as a beneficiary in the document.
More information that you might find useful on the matter
There are many other doubts that people usually have when it comes to life insurance. According to the IRS Government Page, one of the most frequently asked questions is if all incomes paid under a life insurance policy should be reported as taxable income.
The same page explains very clearly that you don’t have to inform them because the amount received is not considered gross income. However, other cases might happen, and you should inform as received interest any other interest received because they are still able to be taxable.
What kind of advantages comes with Life Insurance?
Many things worry us every day. Imagine what will happen to your family if tomorrow should you die. For these cases, you should be one step further and think ahead. While today you might look at it and think: “Do I need this?”, but the truth is that there are a lot of benefits to be gotten, even if you’re not in the position of provider to your family.
Let’s see more about what benefits come with getting life insurance:
Many expenses can be solved with life insurance, including those that come with a mortgage. The material thing that matters the most during these moments to your family is possibly your biggest asset, and it might be in danger once you pass away.
If you get life insurance, you can be sure that after you disappear physically, your family still has a way of handling the mortgage expenses.
Life insurance can be claimed any time after the death certificate has been obtained, this means that this can even help your family with the final expenses that come with the loss of a loved one. Funerary or crematory bills can be pretty large, and this is a way to assure that your family won’t have to deal with a burden like this in the long-term.
If your life insurance has enough coverage, it can be used for many purposes, including the education of your children.
All parents should be proud of seeing their children succeed, and even if you might not be present to celebrate that part of their lives with them. If something bad should happen to you, make sure that your children and loved ones are somehow protected if they rely on you.
Many things could go wrong while trying to file life insurance in Ohio. To avoid these problems from happening, the best thing to do is to gather as much information as possible in the matter, since knowledge in the matter is the only thing you can gather so the proceeds come as clean as possible.
A whole year in expenses can be covered thanks to life insurance. Basic life insurance in Ohio can be acquired by those who have worked permanently for the State for more than 12 months. Remember that while filing the life insurance, you must state very clearly who will inherit the income once you pass away.
If you want your children to get the money and they’re still minors, then you can choose a responsible adult to handle the income until they can do it on their own.
The decision on who will become a beneficiary in your life insurance policy is solely up to you. It is very easy to start the process, and a form can be found in this page, however, once you become eligible for life insurance, a letter from Securian Financial should be received in your mail.
Request assistance from a professional if you believe it’s necessary, but in most cases, it is highly recommended. This way, you can assure that the proceeds will be handled with no problem, and they will explain to you things that you aren’t able to understand by just reading.
We hope the information we gathered in this post has been useful to you.