Life insurance accelerated death benefit (terminally ill)
by Guest » Mon Feb 15, 2010 09:28 am
A friend of mine has been diagnosed with a terminal illness. Is it really possible that he could collect a portion of his death benefit now?
Total Comments: 11
Posted: Tue Feb 23, 2010 05:16 pm Post Subject:
dgoldenz said:
Since when?
Agreed. They're still in the midst of trying to figure this out tax-wise. In most instances, according to the IRS, it will be received tax-free. Not all.
Juanita said this:
If you've received them in the form of compensation out of your accidental plan or health plan, then they'd be treated as your ordinary income and taxed accordingly.
My assumption is that, even though the post wasn't exactly clear, is that she is considering payments under an accelerated death benefit rider that are used for LTC or for needs other than "death," so to speak. Accelerated death benefit riders will normally pay out for "mortality" and "morbidity" events (death and certain health related expenses; LTC, etc.).
If the benefit were to be paid prior to the insured's death as a mortality payment, it's received tax-free. If the benefit were to be paid out for a morbidity event, say LTC need, then the benefits would only be taxed if they (1) exceeded the daily IRS benefit for expense-incurred LTC or (2) if the policy actually paid more than the actual LTC expenses incurred by the insured.
Posted: Tue Feb 23, 2010 05:16 pm Post Subject:
dgoldenz said:
Since when?
Agreed. They're still in the midst of trying to figure this out tax-wise. In most instances, according to the IRS, it will be received tax-free. Not all.
Juanita said this:
If you've received them in the form of compensation out of your accidental plan or health plan, then they'd be treated as your ordinary income and taxed accordingly.
My assumption is that, even though the post wasn't exactly clear, is that she is considering payments under an accelerated death benefit rider that are used for LTC or for needs other than "death," so to speak. Accelerated death benefit riders will normally pay out for "mortality" and "morbidity" events (death and certain health related expenses; LTC, etc.).
If the benefit were to be paid prior to the insured's death as a mortality payment, it's received tax-free. If the benefit were to be paid out for a morbidity event, say LTC need, then the benefits would only be taxed if they (1) exceeded the daily IRS benefit for expense-incurred LTC or (2) if the policy actually paid more than the actual LTC expenses incurred by the insured.
Does that make sense?
InsTeacher 8)
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