This financial option can provide immediate cash to cover medical bills, living expenses, or improve quality of life. However, one of the most common concerns people have is whether they’ll owe taxes on the funds they receive. If you’re in Fort Lauderdale, FL, and are exploring this option, Summit Life Insurance is here to help you understand how viatical settlement taxes may apply to your situation.
What Is a Viatical Settlement?
A viatical settlement is the sale of a life insurance policy by someone who is chronically or terminally ill to a third-party buyer. In exchange, the policyholder receives a lump sum cash payment that is typically higher than the policy’s surrender value but less than its death benefit.
For many in Fort Lauderdale, FL, this can be a critical financial tool. However, before proceeding, it’s important to understand the tax implications of a viatical settlement.
Are Viatical Settlements Taxable in Fort Lauderdale, FL?
Here’s the good news: in most cases, viatical settlement payouts are tax-free for individuals who qualify. According to federal law, if the insured person is certified as terminally or chronically ill by a licensed physician, the lump sum from a viatical settlement is generally exempt from federal income tax.
That means, for many Fort Lauderdale residents, the funds can be used freely for:
-
Medical treatments
-
Long-term care
-
Living expenses
-
Family support or retirement planning
However, it’s important to remember that each situation is unique, and state laws or individual financial circumstances could influence the outcome.
How Federal Law Protects Policyholders
The Health Insurance Portability and Accountability Act (HIPAA) of 1996 provides clear guidelines regarding viatical settlements. Under this law:
-
Terminally ill policyholders (life expectancy of 24 months or less) typically receive tax-free proceeds.
-
Chronically ill policyholders may also qualify, provided the funds are used for long-term care or medical expenses.
This legal framework ensures that people facing health challenges are not burdened with unnecessary tax obligations.
Why Work with Summit Life Insurance in Fort Lauderdale?
At Summit Life Insurance, we are more than just brokers—we are advocates for our clients. When exploring a viatical settlement in Fort Lauderdale, FL, we help you:
-
Understand Tax Rules – We explain how federal and state tax laws may impact your payout.
-
Connect with Licensed Advisors – We work alongside financial and tax professionals for accurate guidance.
-
Maximize Your Settlement – Beyond tax considerations, we ensure you receive the highest possible offer for your policy.
-
Simplify the Process – From paperwork to negotiations, our team handles every step.
By working with a trusted viatical settlement broker in Fort Lauderdale, you’ll have the confidence to move forward knowing your financial future is secure.
Practical Example
Imagine a Fort Lauderdale resident with a $250,000 life insurance policy who is diagnosed with a terminal illness. Instead of surrendering the policy for a small amount or letting it lapse, they sell it through a viatical settlement for $150,000. Because they meet the criteria under HIPAA, this lump sum is received tax-free, allowing them to cover treatments, travel, or family needs without worrying about tax liabilities.
Final Thoughts
If you’re considering a viatical settlement in Fort Lauderdale, FL, it’s essential to understand how tax laws apply to your situation. In most cases, these settlements are tax-free, offering significant financial relief during difficult times. At Summit Life Insurance, we guide you through every step of the process, ensuring compliance with regulations and helping you maximize the value of your policy.
Contact Summit Life Insurance today to learn more about viatical settlement taxes in Fort Lauderdale, FL, and let us help you make the most informed decision for your future.
