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What happens to life insurance proceeds tax-wise if deposited into a banking account?

My father recently passed away, and the life insurance proceeds were paid out. I am curious to know what are the potential tax implications for Ontario, Canada for depositing said proceeds into a bank account or savings account.

Public Comments

1. Generally, it does not matter whether or not you deposit life insurance proceeds into a bank account. Generally life insurance policy proceeds are not taxable to the recipient. You would need to check with a local tax expert to see if life insurance proceeds are taxable in your country. I suspect not. If taxable, it doesn't matter where you deposit the funds, you will be taxed based on the information given the government by the insurance company. Right now, placing your money in a secure bank account might be the best place to put it. Sorry for the loss of your father, it will be a loss felt for a very long time. My hope is that you will find your own direction and will succeed in your life. Good Luck!
2. The proceeds from the life insurance policy are not taxable, however if you invest the proceeds and earn interest or dividends, those amount would be taxable.
3. Sorry for your loss. Assuming we are dealing with a personal owned life insurance policy, then there are generally no tax concerns if paid directly to the Bene (yourself). If paid to the Estate, then to you, it forms part of the Estate, thus subject to Probate Tax, then the net amount is paid to you tax-free (or it could be all paid to you and the Estate will find other funds to cover Probate). Corporate owned policies flow through the CDA, and the net proceeds are tax-free to the Estate Going forward, you (bank account owner) are taxed on the investment earnings. Of course, you can minimize that by implementing some tax advantages strategies such as RRSP contribution, Corporate Class Mutual Funds, deposits into an exempt insurance policy, or even paying off loans/debts.
4. Life insurance benefits are always paid out tax free to the beneficiary. There are no tax implications that you will have to worry about. The only taxes you will have to pay will be on the interest/return you earn on the money after it is paid out to you. Sorry to hear about your loss.