Life insurance death benefits are generally exempt from income tax. However, they are not generally exempt from estate tax. Instead, life insurance proceeds from personally owned insurance policies are fully includable in the insured's gross estate, subject to estate tax rates of 40% under current law. If life insurance proceeds are paid to the surviving spouse, the marital deduction will shield them from estate tax in the estate of the first spouse to die (sometimes called the "deceased spouse"); however, on the death of the surviving spouse, the remaining proceeds will be included in the surviving spouse's estate for federal estate tax purposes, along with the rest of the surviving spouse's assets.