Estate as beneficiary of life insurance proceeds

[sabkosl13]

1. Estate is the beneficiary of the insurance proceeds. It is below the limit so it should be nontaxable. Estate does not have any liability. Total amounts will be distributed to the beneficiaries. Do I need to report it in 1041? If yes, how?
2.  Additionally in NJ life insurance that is paid to the decedent’s estate and then distributed as an estate asset to non-Class A beneficiaries is subject to the NJ inheritance tax. What form the Estate must use to distribute the proceed to the beneficiary if 2 of them are Class A (nontaxable), one non-Class A?

[sjrcpa]

1. There's generally interest income included in the payout. That's taxable income for the 1041.

[sabkosl13]

So I need report it as a interest income, line 1? This time it will be fully taxable. 

[IRonMaN]

No, only any interest received on the payout would be reported as interest.

[sabkosl13]

Estate got one check with total amount and info: "this check represents the proceeds of the group life insurance benefit due to the death of ..., a member of the Public Employee's Retirement System".

[sabkosl13]

So total are interest?

Sorry, by mistake I push previous "post" to fast.

[Accountant-Man]

You can edit your posts by clicking the three dots in the upper right.

[Accountant-Man · Accepted solution]

No, total amount proceeds received less insurance policy amount MIGHT be interest, depending on how long it took the company to pay it out.

Interest income is taxable income; life insurance proceeds are not taxable income.

In some states, like NJ, you might have to file an inheritance return since you have non-Class A beneficiaries. Speak to an estate attorney.

[sabkosl13]

Thank you all.