L&HNationalhard
Under IRC §101(g), accelerated death benefits paid to a 'terminally ill' insured are treated as amounts paid by reason of death of the insured (excludable from gross income). How does §101(g)(4)(A) define 'terminally ill individual'?
An individual certified by a physician as having an illness or physical condition reasonably expected to result in death within 24 months of the certification
BAn individual who has been continuously confined and hospitalized as an admitted inpatient for an uninterrupted period of at least 6 consecutive months while remaining under active medical supervision
CAn individual unable to perform at least 2 of the 6 recognized activities of daily living without the substantial assistance of another person for a period expected to last at least 90 days
DAny individual who is age 80 or older and has been formally diagnosed by a physician with at least one chronic, progressive, and incurable medical condition
Why this is the answer
IRC §101(g), added by HIPAA in 1996, lets life insurers pay accelerated death benefits to terminally or chronically ill insureds and treats those payments as amounts paid by reason of death — fully excludable from gross income under §101(a). 'Terminally ill' is defined in §101(g)(4)(A) as physician-certified life expectancy of 24 months or less. Chronically ill payments under §101(g)(1)(B) borrow the §7702B(c)(2) definition (2 of 6 ADLs for 90+ days or severe cognitive impairment) and are subject to the same per-diem cap as qualified LTC benefits.
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