The actual process of claiming life insurance proceeds is relatively simple. As a designated beneficiary, you’ll fill out and submit a claim form provided by the insurance company, and you’ll attach a certified copy of the policy owner’s death certificate. Once the insurance company processes your claim and determines that it is valid, they’ll pay you the policy proceeds. When you receive the proceeds, there may be some tax concerns that need to be addressed. Income Tax As beneficiary, you won’t need to worry about income tax. Life insurance proceeds are not taxed as income to beneficiaries. Estate Tax Life insurance is included in the policy owner’s taxable estate for the purposes of both federal and state estate taxes. So, if the decedent was also the owner of the policy (this is usually, but not always, the case), then the amount of your life insurance proceeds is added together with the decedent’s other property to determine whether estate tax is due. If federal or state estate tax is due, you might have to contribute a portion of the life insurance proceeds toward payment of the tax bill. Whether or not you’re obligated to do this will depend on the decedent’s estate plan. If he or she died without an estate plan, then this will be determined by state law. One item you won’t be responsible for is the decedent’s other debts. Unless you signed for a debt along with the decedent, his or her debts are the responsibility of the estate – and not you, as beneficiary.