When facing a serious medical diagnosis, financial pressure often adds to the emotional stress. Many Fort Lauderdale residents turn to viatical settlements as a way to access cash by selling their life insurance policy. But before accepting a lump sum, it’s essential to understand the tax implications—especially the rules around viatical settlement taxes in Fort Lauderdale, FL.
At Summit Life Insurance, we help policyholders make informed decisions by explaining when viatical settlements are tax-free and when they may trigger IRS reporting. Here’s a complete breakdown.
What Is a Viatical Settlement?
A viatical settlement is the sale of a life insurance policy by a terminally ill policyholder to a third-party buyer in exchange for a cash payment. The buyer assumes all premium payments and receives the death benefit upon the insured’s passing.
These settlements can provide crucial funds for:
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Medical care
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Long-term support
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Debt repayment
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Hospice or palliative services
But understanding the tax treatment is key to maximizing the benefit and avoiding unpleasant surprises.
Are Viatical Settlements Taxable?
In most cases, viatical settlements are not taxable if the transaction meets specific IRS criteria. According to Section 101(g) of the Internal Revenue Code, the payout from a viatical settlement is income tax-exempt when:
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The policyholder is certified by a physician to have a life expectancy of 24 months or less, and
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The buyer is a licensed viatical settlement provider in the state (such as Florida).
In these cases, the IRS treats the payout like an accelerated death benefit, which is not subject to federal income tax.
Florida’s Advantage: No State Income Tax
For residents of Fort Lauderdale, the benefits are even more favorable. Florida has no state income tax, so even if a viatical settlement were taxable at the federal level (in rare cases), you wouldn’t owe any state income taxes.
This makes Florida one of the most tax-friendly states for those considering a viatical settlement.
When Might a Viatical Settlement Be Taxable?
While most viatical settlements are tax-free, exceptions exist. You may owe taxes if:
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You are not terminally ill (i.e., don’t meet the 24-month life expectancy condition)
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The buyer is not a licensed viatical settlement provider in Florida
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The policy was sold through a private party or investor who does not follow IRS rules
In such cases, the IRS could treat the settlement like a life settlement, meaning parts of the payout might be subject to ordinary income and capital gains taxes.
That’s why working with a compliant, professional firm like Summit Life Insurance is crucial.
How to Ensure Your Viatical Settlement Remains Tax-Free
To protect your proceeds, take the following steps:
✅ Get a physician’s certification of terminal illness
✅ Work only with a licensed viatical settlement broker in Fort Lauderdale
✅ Request written confirmation of the buyer’s licensing status
✅ Consult with a tax professional or CPA before completing the sale
✅ Ask Summit Life Insurance for a tax-smart evaluation of your situation
We ensure every transaction is structured to comply with IRS guidelines—so your money remains in your pocket.
FAQs: Viatical Settlement Taxes in Fort Lauderdale, FL
Q1: Will I receive a 1099 form for a viatical settlement?
In most tax-free cases, no 1099 is issued. If the settlement is taxable, the provider may send Form 1099-B or 1099-LTC.
Q2: Can I qualify for tax-free status with a chronic (but not terminal) illness?
Generally, only terminal illness with a life expectancy of 24 months or less qualifies. Chronic illnesses usually fall under different rules.
Q3: What if I’m unsure about the buyer’s licensing?
Summit Life Insurance works only with licensed providers in Florida, ensuring your transaction qualifies under tax-exempt guidelines.
Q4: Are viatical settlements considered assets for Medicaid or SSI?
They may be, depending on your situation. Consult with a financial advisor or elder law attorney to understand how proceeds affect benefits.
Q5: Is there any tax advantage to using the funds for medical expenses?
While the settlement itself is generally tax-free, using it for qualified expenses like medical care may have additional deduction opportunities.
Choose Summit Life Insurance for Tax-Free Viatical Settlements in Fort Lauderdale
Navigating the tax landscape of viatical settlements can be tricky—but it doesn’t have to be. At Summit Life Insurance, we help Fort Lauderdale residents access their policy’s value without triggering unnecessary taxes.
✅ Licensed providers
✅ Confidential assessments
✅ Personalized, tax-conscious strategies
👉 Contact Summit Life Insurance today to learn if you qualify for a tax-free viatical settlement and get a no-obligation consultation.
