As stated above, the IRS taxes all of the property that we transfer to others whether while we are still alive or at the time of our deaths; however, there are a few exceptions to this transfer tax. One such exemption is that under current tax laws every American citizen can transfer to others a certain amount of their property tax-free. The amount of property that you can transfer tax-free is known as the “exemption” amount and is determined year to year by Congress. The tax on the value of an estate in excess of the exemption amount can be as high as almost fifty percent of the estate. The addition of life insurance proceeds can, and often does, push estates above the exemption amount. When this happens, the estate becomes subject to estate taxation simply because of the existence of the life insurance. The result is that a large portion of the life insurance goes to pay estate taxes instead of to the beneficiaries. Since the exclusion amount and the various tax brackets are frequently changed by Congress, you should see a qualified estate planning attorney to learn the current amounts and to determine if your life insurance is rendering your estate taxable.