If this was DESTH BENEFIT
from a Life insurance policy, there will be no reporting
at all to IRS.
Life insurance benefits are tax free and there is no 1099-R
or other reporting to IRS.
They have no way to be aware of it. And insurance companies are not part of the federal
payments system where everything from tax refunds to student loans, to social security can be attached to satisfy tax debt.
There are two things to be aware of.
(1) If there were a distribution
from a life policy because of a lapse of the policy THEN there could be a 1099-R and there would be an awareness by IRS HOWEVER....
(2) They would gave to go to court and actually get a lien
, levy or garnishment to attach dollars for a tax debt from a PRIVATE account such as life insurance, brokerage accounts or bank accounts.
By again, HERE, it seems that this is the payout of a death benefit ... which is a completely tax free, non-tax reportable, event.
Just be sure to keep up with that payment plan so that they will NOT get a lien, levy or garnishment ... and be aware that even WITH a current payment plan, they CAN attach things that are a part of the FEDERAL payments system, such as federal and state
tax refunds, social security payments, etc.
let me know if you have questions ...