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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I was on Long Term Disability years when MetLife suddenly

Customer Question

I was on Long Term Disability for 4 years when MetLife suddenly denied my claim. I sued them and we have since agreed to a one time payout that would subsequently release MetLife, etc from any future obligations, etc. My question is this. While I was receiving a monthly check from MetLife was not responsible for paying any taxes on it because the terms in the LTD policy from my previous employer. If I agree and sign this release will the lump sum settlement payout fall under those same terms or will it be taxable? I have been told it should follow the same guidelines as my previous monthly payments but I want to be sure.
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
That's right.
If the benefit wasn't taxed before (that typically happens when the premiums were being paid with after tax dollars) then the settlement (simply a catch-up and acceleration of those same benefits) will not be taxable either.
Let me know if you have questions.