Death, Taxes, And Reform
Your article, "A ghoulish debate over cashing in on death" (Top of the News, Sept. 19), missed one aspect of this debate: the tax consequence of accelerating death benefits of life insurance contracts.
Current law generally provides that amounts received under a life insurance contract prior to death are taxable to the extent the amount received exceeds premiums paid. I have long championed legislation that would provide for tax-free treatment of accelerated death benefits and was pleased that it was included in the health-care reform bill reported by the Ways & Means Committee.
The legislation would provide that individuals certified to have a terminal illness or injury that can be reasonably expected to result in death within 12 months can elect to receive the proceeds of their life insurance contracts tax-free. As a consumer protection, policyholders must receive net present value of the death benefit in order to receive favorable tax treatment. This means that insurance companies cannot discount the policies more than inflation.
While it appears unlikely that Congress will complete comprehensive health-care reform this year, I believe this provision, which enjoys broad bipartisan support, should be and will be a part of any health-care legislation we enact.
Barbara B. Kennelly (D-Conn.)
House of Representatives