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Thanks! Yes, these are the benefits of the life insurance policy. The life insurer - Cigna - provided the benefits by putting the money in some kind of account and providing the spouse a binder of checks. The spouse cut a check from the Cigna account for 10K to their widow's son, then cut a check for the rest of the benefits to his personal bank account.
Yes it is a sort of crappy move that some of the insurance companies do, keeping the proceeds like that into an account for you, hoping that you keep the money with them in an underperforming account and they don't have to disburse to you.
Yea, it seemed sort of odd/sketchy that they did that. I've emailed a tax accountant to figure this out one way or another, but I'm assuming it won't be taxable.
I'm curious as to why you think this is a crappy move by the insurance company. The beneficiary can write a check immediately for the full amount if they want. Many people like the convenience of having it done this way as they can write out checks as needed to pay for expenses. How is this different than receiving a check? Other than not having to wait for a check to clear if the company sent that instead? And being that it's in a money market account how is it underperforming? The account belongs to the beneficiary so how have they avoided disbursing the money?
Unless something was done poorly when the policy was set up a death benefit is not taxable.
The only thing that might be taxable is any interest that may have accrued before the checks were written.
You sound like you work for an insurance company. I have seen people who leave large sums of money sitting in the underperforming money market for extended periods of time because they don't know what to do with it. Then the insurance company calls then and sells them something over priced and under performing. Boom...another win for insurance.
