Bernice is the beneficiary of a $50,000 insurance policy on her father's life. If she receives the proceeds in installments from the insurance company that carries the policy, she will earn only five-percent interest per year, receiving $10,500 per year for five years. Bernice decides to take the $50,000 in a lump-sum payment and invest the funds herself. Of the $50,000 received:

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Life insurance proceeds paid out to beneficiaries upon the death of the insured are generally tax-free. This means Bernice would not owe taxes on the $50,000 lump sum she receives from her father's life insurance policy.

Bernice Is the Beneficiary of a $50,000 Insurance Policy on Her