A residual medical critical life insurance account is a type of insurance policy that pays a lump sum benefit to the policyholder if they are diagnosed with a serious illness covered by the policy. The benefit can be used to cover medical expenses, household bills, and other costs. Although I am not sure of the cost or the coverage of these types of policies in China, in the US the coverage is generally in under $50K, and the cost per month varies by age.
So Form 8938, which is a Statement of Specified Foreign Financial Assets is required when a U.S. taxpayers is holding specified foreign financial assets with an aggregate value exceeding $50,000.
The following comes form the Instructions for Form 8938:
A specified individual is:
- A U.S. citizen
- A resident alien of the United States for any part of the tax year (see Publication 519 for more information)
- A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return
- A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Publication 570 for definition of a bona fide resident).
A specified foreign financial asset is:
- Any financial account maintained by a foreign financial institution, except as indicated above
- Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
- Stock or securities issued by someone other than a U.S. person
- Any interest in a foreign entity, and
- Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.
Foreign life insurance policies can hold foreign assets, investments, accounts, and income. The income generated from these policies is taxable in the United States, and the value of the policy must be reported to the IRS if in aggregate the value is $50,000 or more.
I would err towards reporting it if the value of the policy is $50,000 or over, though these policies in the US are generally under $50,000.
Thank you for the opportunity to answer your questions @Min Zhao
All the best,
Marc T.
TurboTax Live Tax Expert
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
