Income Tax Planning for the Terminally Ill
Terminal illness changes your financial outlook. It may be that you require more current income due to increased medical expenses or a change in lifestyle. Or perhaps transferring assets to your loved ones and engaging in estate planning is foremost on your mind. In either case, minimizing your payment of federal income taxes is likely to be one aspect of your general tax planning if you are terminally ill.
Unfortunately, terminal illness often prohibits continued employment. Consequently, depleting or liquidating investment funds, retirement plans, and insurance policies may become necessary to generate sufficient cash. It is important to understand the tax ramifications of your financial decisions. It is also important to understand the extent to which your medical expenses may be deducted on your federal income tax return.
Income tax planning for the terminally ill involves four general areas: general income and deduction issues, insurance considerations, retirement planning, and the income tax consequences of estate planning.