Terry, in your column in today's Chicago Tribune you state the "The total value of life insurance and retirement policies are included in the asset value of the estate of the person who died while owning the account or policy."
Did you mean only the cash value of the policy would be included in the holders estate or the insurance amount? Say one has a $500,000 policy with cash value of $45,000. Upon death is the total $545,000 included in the estate or just the cash value of $45,000?
Well, at the owner’s death the policy would be worth just the maximum face value of $500,000. (The cash value is just what you can borrow out of the policy at any time.) And yes, the full face value would be included in the estate of the deceased person — even though the $500,000 would go directly to the beneficiary who has no tax obligation.
Please note — for Federal estate tax purposes, the estate would have to total over $5.45 million to be liable for taxes. (That includes the value of any homes, retirement accounts, and other assets.) But some states (including Illinois) have a lower limit at which estate taxes are levied.