Viatical Settlement
Sale of life insurance by a terminally ill person (24 months or less) to a third party for 50-70% of death benefit, with proceeds TAX-FREE.
Exam Tip
Viatical = terminally ill (≤24 months) sells policy. TAX-FREE. Higher payout (50-70%) vs. life settlement. Ownership transfers.
What is a Viatical Settlement?
Terminally ill person sells policy to investor.
Typical Payouts
| Life Expectancy | Payout |
|---|---|
| <6 months | 70-80% |
| 6-12 months | 60-70% |
| 12-24 months | 50-60% |
Tax Treatment
TAX-FREE for terminally ill under IRC 101(g).
Key Difference from Life Settlement
- Viatical: Terminal (≤24 months), tax-free
- Life settlement: Senior (65+), taxable
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Life Settlement
Sale of life insurance by a senior (65+) to a third party for 10-25% of death benefit, with proceeds TAXABLE in three tiers.
Accelerated Death Benefit
An accelerated death benefit is a life insurance policy provision that allows terminally ill policyholders to receive a portion of their death benefit while still living, typically when diagnosed with a terminal illness with 12-24 months to live.
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