Health and Life Insurance

Answer: B - If an insured individual has an estate that is valued at $4 million and the estate tax exemption in the year of their death is $1 million, then $3 million of their estate would be subject to estate taxes. This is calculated at $4 million estate - $1 million exemption = $3 million subject to estate taxation. Even if the individual owns a life insurance policy, unless the individual’s ownership interest in the policy was removed, the death benefit proceeds would still be counted as a taxable portion of their estate.