A 62-year-old woman received a $900,000 life insurance payout after her husband died unexpectedly last year. Her adult son has since asked her for a $150,000 loan toward a house down payment, saying it’s something his father “would have wanted.”
The immediate priority isn’t the loan request—it’s making sure the payout can support what could be another 25 to 30 years of retirement without her husband’s income. Life insurance death benefits are generally not subject to federal income tax, according to the IRS, allowing beneficiaries to plan around the proceeds without an unexpected income tax bill reducing the initial payout.
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