What happens to the beneficiary if a policyowner dies one month after purchasing a $50,000 life insurance policy?

The beneficiary receives $50,000 income tax-free because life insurance death benefits are generally not subject to income tax. When a policyowner passes away after purchasing a life insurance policy, the insurance company pays the death benefit amount specified in the policy, which in this case is $50,000. This payout is made to the designated beneficiary and is intended to provide financial support after the policyholder's death.

Life insurance benefits are structured to offer financial relief to the beneficiaries, and they receive the full amount designated in the policy without any income tax implications under the Internal Revenue Code. It's important to note that the premium payments made by the policyowner do not affect the death benefit at this stage, as the benefit is solely based on the policy's terms and the coverage amount. Thus, the correct answer reflects the typical outcome in these situations, emphasizing the tax-free nature of life insurance benefits for the beneficiary.