Wrongful death settlements are split into sub-categories called damages. Some of these damages are taxable, and some are not. Therefore, it depends on the types of compensation you received after losing a loved one. This area of law contains several caveats. Our wrongful death lawyer can answer any questions you have about your settlement.
Which Damages Could Be Taxable in Wrongful Death Settlements?
In many wrongful death cases, you can receive compensatory damages. These damages account for the losses that family members experienced after their loved one passed away. This could include pain and suffering, loss of companionship, or a lower family income. Most compensatory damages are non-taxable.
Punitive damages, on the other hand, are designed to punish the liable party. These damages are issued less frequently than compensatory damages and only appear in a case when:
- The liable party intended to cause harm
- The liable party behaved in a grossly negligent manner
In general, compensatory damages are not considered taxable, and punitive damages may be taxable, according to the Internal Revenue Service (IRS).
Other Caveats to the Rule
Punitive damages aren’t the only type of taxable damage in a wrongful death case. Other types of damages that could be taxed include:
- Reimbursement for lost wages: If you received compensation for the wages your passed loved one could have earned, this compensation may be taxed.
- Medical expense deductions: If you chose to deduct medical expenses while filing your taxes and later received compensation for these medical expenses, this portion of your settlement could be taxable.
- Emotional distress damages: Emotional distress damages are taxable if they were not the result of a physical injury. Therefore, if you lost a loved one and received emotional distress damages, it’s likely that you’ll need to pay taxes on this portion of your compensation.
Federal and state tax codes are incredibly complex. If you still feel confused about the taxes associated with your wrongful death settlement, consider speaking with our lawyer. They can provide you with clarity and explain which parts of your settlement are taxable.
What Types of Damages Are Non-Taxable?
The following types of wrongful death damages are usually non-taxable:
- Medical expenses (provided they weren’t deducted)
- Pain and suffering a loved one experienced before they passed away
- Mental anguish a loved one experienced before their passing
- Funeral and burial expenses
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How Are Wrongful Death Settlements Paid Out?
Wrongful death settlements are issued in one of two ways, lump sums and structured settlements:
- Lump sums: A lump sum is a singular upfront payment. This means that you’ll receive everything you’re owed in one payment. Once you’ve received this payment, this case is closed.
- Structured settlements: Structured settlements are paid over time. For example, imagine you received a $1 million settlement. Via a structured settlement, you could receive roughly $27,000 a month for three years. Structured settlements don’t need to have the same amount of incremental payments. You could receive a larger payment upfront and then lower payments later.
Who Can Receive a Wrongful Death Settlement?
In Florida, wrongful death compensation is limited to a group known as survivors. They may include:
- The spouse of the person who passed away
- The children of the person who passed away
- The parents of the person who passed away
- A family member dependent on the person who passed away
If you’re planning to file a wrongful death lawsuit, you may have heard the term “personal representative.” When a person passes away in Florida, an individual called the personal presentative is appointed to oversee their finances. This includes filing a wrongful death lawsuit.
Therefore, when you pursue a wrongful death lawsuit, the personal representative must be in charge. However, you can still receive compensation even if you aren’t the personal representative. Once the lawsuit concludes, the settlement will be distributed to qualifying survivors.
How Are Wrongful Death Cases Settled?
Wrongful death cases can be initiated by a lawsuit. However, lawsuits don’t always end in a civil trial. When a lawsuit is filed, these are the two most common outcomes:
- An out-of-court settlement: After a lawsuit’s been filed, both parties involved in a case can negotiate to come to a settlement agreement. This may involve two legal teams or a legal team and a relevant insurer.
- Civil trial: Not all wrongful death cases can be settled through negotiations, though. If both parties fail to agree, the case could proceed to a civil trial. During the trial, both parties will make their case before a judge and jury. Typically, the jury has the final say in the outcome of the case.
Speak With Our Firm About Our Wrongful Death Lawyer Today
At Andrew Pickett Law, PLLC, we understand how difficult wrongful death cases are. Not only do you have to deal with the grieving process, but you must also familiarize yourself with the labyrinth of federal and state laws that apply to these cases. We’re here to make this process as straightforward as possible. Contact our offices for a free case evaluation. We can provide straightforward answers to your difficult questions.