Death and Taxes: Death Benefits For Families of Google Employees.

When a Google employee dies, the deceasedemployee’s surviving spouse or domestic partner receives a check for 50% of thedeceased employee’s salary every year for 10 years. Forbes raises the questionof whether that sum is taxed?

The answer depends on how Google is set up.  Forbes finds it likely that it isfunded as group life term insurance,which means the benefit is consideredcompensation to a Google employee. If this is the case, then whether it is taxable still depends on howmuch it is worth.  Under Section 79of the tax code, there is no income to Google employees if the total coverageis not greater than $50,000, meaning the IRS can tax the employees on coveragein excess of $50,000.  If youremployer covers you for a death benefit that is worth more than $50,000 a year,the benefit is wages that goes on your W-2.  The tax is usually small, but it still exists.

When that employee dies however, it is unlikelythat the estate, surviving spouse, or partner is taxed on the 10-yearpayouts.  Death benefits are notsubject to income tax in most cases. And typically, it should not be subject to estate tax if a beneficiaryis named. 

See Robert W. Wood, WillIRS Get A Piece of Google’s Generous Death Benefits, Forbes, Aug. 10,2012.

Special thanks to Brian J. Cohan (Attorney atLaw, Law Offices of Brian J. Cohan, P.C.) for bringing this article to myattention.