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Thread: Aflac

  1. #1
    CJane is offline Senior Member
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    Aflac

    What is the name of your state (only U.S. law)? KS, but probably irrelevant.

    My step-father just had a liver transplant, and is covered by Aflac. Due to his stay in ICU prior to transplant, and the transplant itself, there is going to be a rather large settlement coming.

    Is this taxable? If so, at what rate?
  2. #2
    LdiJ is offline Senior Member
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    Quote Originally Posted by CJane View Post
    What is the name of your state (only U.S. law)? KS, but probably irrelevant.

    My step-father just had a liver transplant, and is covered by Aflac. Due to his stay in ICU prior to transplant, and the transplant itself, there is going to be a rather large settlement coming.

    Is this taxable? If so, at what rate?
    Settlement? For what? Aflac is insurance, but what type of insurance settlement are we talking about? If its purely medical insurance then no, there is no taxable event, because the insurance is simply going to be paying his medical bills.

    If its disability insurance, then it will depend on who paid the premiums, he or his employer. If he paid the premiums, it won't be taxable, if his employer paid the premiums, it will be taxable.

    If its somehow some other sort of settlement, it may or may not be taxable.

    If its taxable, it will be taxable at his marginal tax rate, or possibly higher than his marginal tax rate, if it bumps him up into a higher bracket.
  3. #3
    CJane is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    Settlement? For what? Aflac is insurance, but what type of insurance settlement are we talking about? If its purely medical insurance then no, there is no taxable event, because the insurance is simply going to be paying his medical bills.
    No. Aflac is supplemental. It pays cash directly to the patient based on several factors.

    For instance, every time my mother goes to the chiropractor, Aflac sends her a check for $75.

    1 day in ICU = $1000
    Transplant = $several thousand

    This is outside of anything covered by insurance, and is sent to the policy holder as a check to be used for whatever. That's why in the commercials, they focus on helping you make your car payments or pay your utilities while you're sick or whatever. It has nothing at all to do with what's covered by regular insurance or not.

    Premiums are paid by my Mother as it's really her policy and he's just covered.

    Does that help?

    He currently collects LTD from a policy he had when he was working, but this 'settlement' (can't think of a better word) is quite a bit more than he made in a year when he was working full-time... have no idea what that means as far as tax bracket though.
  4. #4
    FlyingRon is offline Senior Member
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    Did mom pay for it outright (separate from the job) or was it done with some sort of pretax money (FSA or otherwise) at work?
  5. #5
    seniorjudge is offline Senior Member
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    Quote Originally Posted by FlyingRon View Post
    Did mom pay for it outright (separate from the job) or was it done with some sort of pretax money (FSA or otherwise) at work?
    AFLAC is generally paid from pretax money.

    Sometimes people get pretty hefty checks from AFLAC; it goes directly to the person and is not generally thought of as paying medical bills.

    CJane...is that what you mean?
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  6. #6
    LdiJ is offline Senior Member
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    Quote Originally Posted by CJane View Post
    No. Aflac is supplemental. It pays cash directly to the patient based on several factors.

    For instance, every time my mother goes to the chiropractor, Aflac sends her a check for $75.

    1 day in ICU = $1000
    Transplant = $several thousand

    This is outside of anything covered by insurance, and is sent to the policy holder as a check to be used for whatever. That's why in the commercials, they focus on helping you make your car payments or pay your utilities while you're sick or whatever. It has nothing at all to do with what's covered by regular insurance or not.

    Premiums are paid by my Mother as it's really her policy and he's just covered.

    Does that help?

    He currently collects LTD from a policy he had when he was working, but this 'settlement' (can't think of a better word) is quite a bit more than he made in a year when he was working full-time... have no idea what that means as far as tax bracket though.
    This one is going to need some research. If it can be classified as a disability payment, and your mother 100% paid the premiums, it shouldn't be taxable. If it cannot be classified as a disability payment or if your mother didn't 100% pay the premiums it gets stickier.

    However, for the sake of caution, he should proceed as if it is. I would recommend setting 40% of it aside until it can be determined whether or not he will owe any tax. That will cover both federal and state income taxes with a generous margin of safety.

    I am willing to do this research for you. You already know my personal email addy.

    I am going to need to know their AGI for 2007. I am going to need to know how much the settlement will be for, and I will need to know exactly what Aflac calls the policy...by name.
    I will also need to know for sure if the premiums were paid with pretax or postax dollars. I will probably also have more questions as we go.

    Generally supplemental policies are designed to cover whatever regular insurance doesn't cover. Obviously this is a different type of policy than a standard supplemental one. I understand what general kind of policy you mean (I used to have one of those myself) but its been so long since I have dealt with one, tax wise, that I want to make sure that I give you very accurate advice.
  7. #7
    FlyingRon is offline Senior Member
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    While AFLAC does heavy marketing to employers, you can by it direct as an individual. It's a supplemental disability policy, so yes, everything Ldij said applies I believe.
  8. #8
    CJane is offline Senior Member
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    Quote Originally Posted by seniorjudge View Post
    AFLAC is generally paid from pretax money.

    Sometimes people get pretty hefty checks from AFLAC; it goes directly to the person and is not generally thought of as paying medical bills.

    CJane...is that what you mean?
    I'm trying to find out if it's paid pre-tax or not. Mom is in Omaha at the transplant hospital (will be for 6+ weeks) and so doesn't have access to her pay stubs. I'm going to assume it's pre-tax.

    And hes, it's rather a hefty amount... in excess of $40K.
  9. #9
    seniorjudge is offline Senior Member
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    I am interested in the answer also.

    LdiJ said it could be classified as disability payments.

    Why is that?

    A person does not have to be disabled to get AFLAC payments.

    I'm not arguing with anyone because I don't know the answer but I want to know the answer.
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  10. #10
    LdiJ is offline Senior Member
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    Quote Originally Posted by seniorjudge View Post
    I am interested in the answer also.

    LdiJ said it could be classified as disability payments.

    Why is that?

    A person does not have to be disabled to get AFLAC payments.

    I'm not arguing with anyone because I don't know the answer but I want to know the answer.
    Because if it is classified as disability payments, its temporary disability. To get you through the illness and recovery period. Disability does not have to mean permanent disability. It does for SSDI, but not for other kinds of disability insurance.
  11. #11
    CJane is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    Because if it is classified as disability payments, its temporary disability. To get you through the illness and recovery period. Disability does not have to mean permanent disability. It does for SSDI, but not for other kinds of disability insurance.
    Ok, Aflac DOES offer 'short term disability insurance'. However, what is paying out (and has already paid since they mail a check w/in a week) due to the transplant is a policy called 'Specified Health Event'. This pays a set dollar amount for a heart attack, cancer diagnosis, broken arm, etc.

    There's also a 'Hospital Intensive Care' policy which my Sdad is covered under. This pays $700/day for ICU care for days 1-7. For days 8-15, it pays $1200/day. See how that can add up when he's in and out of ICU? Because it pays every time he's admitted as long as for a period of time in between, he's NOT in ICU. So he can be in ICU for 2 weeks, go to a regular room for one day, and then go BACK to ICU for 2 weeks and the pay outs start over. So far, he's been in ICU on 3 seperate occasions for anywhere from 2-20 days.

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