Does Estate Tax Apply To Life Insurance? 
Yes , estate tax does apply to life insurance . In 2012 , if the size of your estate -LRB- with life insurance proceeds included -RRB- exceeds $ 5,250,000 , estate tax would have to be paid on the excess at a top rate of 35 % . Some people take care of estate taxes by buying a life insurance policy to pay them . Some use an Irrevocable Life Insurance Trust -LRB- ILIT -RRB- to own and be beneficiary of the policy . There is so much expertise needed in transactions like this that we hire a professional who understands both life insurance and tax strategies for large cases . Make sure you get the best advice possible to help preserve your hard earned estate . 