I paid the LTD premiums, so I know that if the insurance company had held up their end of the bargain and just paid me the benefits I needed, the monthly payments would be tax free. But they didn't, enter lawyer.
questions:
1) We're getting close to a settlement number. I had assumed that a lump sum payment would also be tax free, but I've read articles that allude to 'make sure it's settled properly' to avoid tax, but I can find no specifics.
2) I know that lawyer's fees to receive income owing is tax deductible, ie wrongful dismissal and missing STD monies, but are the fees for the LTD claim deductible if the lump sum is tax free?
Congrats on getting any money out of a private LTD company!!! I can't give any tax advice because I have not received a lump sum payment but it seems like this is exactly the kind of question your lawyer should be able to answer in advising you whether to take the settlement. I'm kinda curious why you're taking a settlement? LTD companies only offer settlements if it's cheaper to them than the alternative, ie paying you for the duration of a claim. Did your lawyers specifically pursue a settlement? Are they getting paid more for a settlement than if you received ongoing payments? Was this an appeal procedure? If you're just so fed up with the nightmare of dealing with the LTD company and willing to take a settlement to be free of them, I 100% get it (I've certainly been tempted myself!) The only reason I haven't pursued one is because settlements are a win for the LTD company and I'm making those jerks pay me every penny they owe me.
I haven't gotten money yet, but I expect to, I think we're close. A lump sum will never be more than what they'd have to pay if they paid out monthly, there's the risk that I get hit by a bus or go get a job, and they'll have paid too much. I'm perusing a settlement primarily because they denied me both STD and LTD, and 1st and final appeal - I was left with little choice. If they want to reinstate me and pay me back entitlements, I'd be okay with that, but I expect I'd be back suing them in a year when they cut me off again (like most policies, mine has a 2 year my occupation and it's any occupation after than), also, I'd have to continually submit to them doctors' notes, possibly a doctor of their choice, which puts risk and extra stress on me. Sadly, the insurance company has all the control. And I suspect that they deny many claims because they can, and most people don't have FU money to wait them out. When I first went off, I heard of a few people that made claims because of back pain and were denied STD, and those people went back to work.
The reality is, the insurance company always wins and the lawyers most of the time. There is no such thing as damages for LTD denial, which just encourages them to deny and may a little later.
