26 USC § 101 - Certain Death Benefits 

 

• (a) Proceeds of life insurance contracts payable by reason of death

•       (1)  [The] general rule [is that] … gross income does not include amounts received … under a life
               insurance contract, if such amounts are paid by reason of the death of the insured.

 

 

        (g) Treatment of certain accelerated death benefits

•        (1)  In general … amounts shall be treated as an amount paid by reason of the death of an insured
               [when] … [the] amount received … [is paid from a policy insuring someone who] … is … terminally ill … 

 

•       (2)  Treatment of viatical settlements

•           (A)  In general if any portion of the death benefit under a … [qualifying] life insurance contract on …
                  [a terminally ill] insured … is sold … to a viatical settlement provider, the [sale proceeds] … shall be
                  treated as … [death benefits paid] under the life insurance contract …  

 

•            (B)  Viatical settlement provider

•                  i.  In general [a] … “viatical settlement provider” [is a company that is] … regularly engaged in the
                       trade or business of purchasing … life insurance contracts on the lives of [terminally ill] insureds …

•          

•                  ii.  Terminally ill insureds [are those individuals who meet the definitions of being terminally ill as set
                        forth] ... [in] sections 8 and 9 of the Viatical Settlements Model Act of the National Association of      
                        Insurance Commissioners ...

•