Taxes and Viatical Settlements

Viatical Settlement funding was made tax-free as of January 1, 1997. According to the Health Insurance Portability and Accountability Act of 1996, income acquired from viatical settlements and accelerated benefits for patients who are terminally and chronically ill are not taxed on a federal level. The only stipulation is that the life expectancy of the viator must be less than two years and the viatical settlement company must be licensed.

However, some states do not follow the same standards. Most states currently do offer an exemption from state taxes on money gained from a viatical settlement, however, all fifty states are not in accordance,. Therefore it is important to check if your state taxes viatical settlements before entering into one.