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Thanks, Phil. I've always wondered about things like that too. Where I live we often have benefits for people struck by diasater or serious illness. I always thought they were gifts but wondered what the IRS position was.

In some cases there is another issue though. A man I know suffered a heart attack followed by multiple strokes during recovery from quintuple bypass. At 53 he was never going to be able to live at home again but was otherwise healthy. Friends raised over $50K for the family and the man became a permanent resident of the local veterans home after several months in a private rehab facility. The family was advised by their attorney to get the $50K out of Illinois ASAP. His daughter, in the military based in DC, took the money and sends her mother back here what she needs. (Or she did. I doubt there is anything left after more than 15 years.) The important thing here is the attorney was worried the state would try to claim the money as reimbursement of medicaid they had paid before he went to the vets home.

Mixed feelings on that issue. I understand the state wanting to recover their expense but I also know the family had huge personal outlays beyond insurance that they couldn't afford during his treatment. Always easy to say just cut spending or throw them off medicaid until you know them personally.
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