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Federal
Tax Free Time Has Come
Provided by Viaticus, Inc.
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HEALTH INSURANCE PORTABILITY
AND ACCOUNTABILITY ACT (H.R. 3103)
- Tax-Free: Moneys received from the viatication of life
insurance policies, on the life of individuals who are either
terminally or chronically ill, are excluded when determining the
consumer's gross income.
- Terminally ill individual: Defined as a person, certified
by a physician, with an illness or physical condition that
reasonably can be expected to result in death within 24 months. All
proceeds received are free from federal income tax.
- Chronically ill individual: Defined as a person, certified
by a physician within the previous 12 months, as being unable to
independently perform at least two activities of daily living (e.g.
toileting, transferring, bathing, dressing and continence) for at
least 90 days due to a loss of functional capacity or cognitive
impairment. Proceeds up to approximately $64,000 annually will be
considered free from federal income tax.
- Qualified Providers: To qualify for tax-free treatment the
viatical settlement transaction must be made with a "qualified
viatical settlement provider."
- Enterprise: Regularly engaged in the business of purchasing
life insurance policies.
- Licensing: Licensed for that purpose in the state in which the
insured resides or, in cases where the insured resides in a
state not requiring licensure, meets the requirements pertaining
to general rules and disclosure contained in Sections 8 and 9 of
the National Association of Insurance Commissioners (NAIC)
Viatical Settlements Model Act.
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NAIC VIATICAL SETTLEMENT MODEL ACT
- Section 8: Disclosure, includes
- Education: Requires viatical settlement providers to reveal to
viators the potential impact a viatication may have on the
consumer's taxes or eligibility for government benefits.
- Section 9: General Rules, includes
- Right of Rescission: Requires all viatical settlement
contracts to contain an unconditional right of rescission
provision.
- This provision is 30 days from date of contract or 15 days
from receipt of viatical proceeds.
- Consumer Protection: Requires viatical settlement providers to
pay the proceeds of a viatical transaction to a third party
escrow agent or trustee pending acknowledgment of the
assignment.
- Confidentiality: Requires strict adherence to state law
requiring confidentiality of medical information.
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