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Simple English definitions for legal terms
death benefit
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A quick definition of death benefit:
Term: Death Benefit
Definition: When someone who has a life insurance policy or pension account dies, the person they chose to receive the money (called the beneficiary) gets the assets. The beneficiary can get all the money at once or in smaller amounts over time. Sometimes the beneficiary doesn't have to pay taxes on the money, but other times they might have to pay taxes.
A more thorough explanation:
Death benefit
When someone who has a life insurance policy or pension account dies, the person they chose to receive the money gets a payment called a death benefit. The money can be given all at once or in smaller amounts over time. Some death benefits are not taxed, but others may have to pay taxes.
Example 1: John has a life insurance policy that will pay out $100,000 to his wife when he dies. When John passes away, his wife receives the $100,000 as a death benefit.
Example 2: Sarah has a pension account that will pay out $500 a month to her son after she dies. When Sarah passes away, her son will receive $500 a month as a death benefit.
These examples show how a death benefit works. When someone dies, the person they chose to receive the money gets a payment. The payment can be given all at once or in smaller amounts over time. The money is usually given to a family member or someone close to the person who died.