Viatical Settlements involve selling your life insurance policy when you have a terminal or chronic illness, with a life expectancy of under two years, usually to access urgent funds for medical expenses or other needs. These settlements provide a financial lifeline by allowing individuals to access some of their policy’s value while still alive. The proceeds from a viatical settlement are income tax-free, as they are considered an advance on the death benefit. This exemption ensures that the funds can fully cover necessary treatments, improve quality of life, or settle debts without additional tax burdens.
If you’re considering a viatical settlement to turn your life insurance into cash, it’s important to review the tax implications, including how the payout might affect your taxable income and financial situation. Consulting a financial advisor or tax professional is advisable to understand the financial impact. They can offer personalized advice and guide you through the complexities of your decision, ensuring you make an informed choice.
