Magazine article The CPA Journal

Tax Relief to Benefit Individuals with Life-Threatening Illnesses

Magazine article The CPA Journal

Tax Relief to Benefit Individuals with Life-Threatening Illnesses

Article excerpt

A major provision in the recently enacted health insurance bill represents a landmark development that

will benefit millions of Americans with chronic and life threatening illnesses. The "Health Insurance Portability and Accountability Act of 1996" allows individuals with cancer, heart disease, Alzheimer's disease, and othe chronic and life-threatening illnesses to now receive the proceeds of "living benefits," such as viatical settlements-- the sale or exchange of a life insurance policy--free of

any Federal income tax.

The "living benefits" provision, which was championed by Representative Jim Bunning, Republican of Kentucky, will benefit two large groups of

Americans--1) those diagnosed as having a life-threatening illness, such as cancer, heart disease, AIDS, Alzheimer's Disease, or Lou Gehrig's Disease; and 2) those with certain chronic illnesses, many of whom are elderly. Approximately 2 million Americans are diagnosed with a lifethreatening illness each year. Many more suffer from severe chronic illnesses.

Specifically, the legislation allows the proceeds from "living benefits" to be tax-free for individuals who are terminally ill--defined as having been certified by a physician to be suffering from an illness likely to result in death within 24 months of certification--and who are "chronically ill," defined generally in the bill as being permanently and severely disabled by an illness. …

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