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According to the Internal Revenue Service’s IRS rule 1.104-1, you are not required to pay taxes on a settlements for a wrongful-death claim. The IRS classifies the settlement for wrongful death as non-taxable since it is part of a claim resulting from personal injury or physical illness.
Understanding the taxable status of your wrongful death settlements lawsuits can help you maximize your settlement and ensure that it lasts as long as necessary to provide for your family.
Understanding Taxable Parts of a Wrongful Death Settlements
Certain circumstances can make it difficult to determine if your settlements from wrongful death lawsuits are taxable. The IRS does not tax wrongful death settlements. In certain circumstances, the IRS may tax settlement amounts or portions including:
- You can deduct from your income the portion of your settlement that you received as a result of medical expenses and bills.
- You may be entitled to certain portions of the settlement for emotional distress, even if your distress was not caused by an injury or illness.
- The proceeds of a lawsuit, or settlements with insurance companies that qualify as punitive damage.
Your lawyer can help you determine how to classify each part of your settlement and whether it will affect the taxability of your compensation.
Assigning Wrongful Death Losses
Taxability of settlements in wrongful death suits may be affected by the way that courts allocate portions of an award.
- The loss of support that you would have received had your loved one not been killed.
- The loss of future financial contributions that your loved one would otherwise have made.
- The loss of household services and other services that your loved one would normally have provided.
- The loss of companionship and company of a parent, spouse or child due to their unjustified death.
- Anguish and mental anguish that you experience when your loved one is killed by a negligent act.
- You can claim back the money you paid for funeral and burial costs.
A punitive damage award could make a portion of your settlement taxable. Punitive damages are awarded when the person responsible for the injury or death of a loved one acted intentionally or without regard to how their actions might affect others.
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Qualified Survivors Can File a Claim for Wrongful Death Settlements
Wrongful death settlements can be filed when someone else’s careless or reckless actions result in the death of a member of your family. You may not be entitled to financial compensation if you are a relative of the deceased.
- A surviving spouse.
- A biologically or adopted child younger than 25.
- The biological or adopted parent who survives.
- The biological or adopted sibling.
To qualify for financial compensation, a surviving sibling will need to prove that their deceased loved one provided them with some or all of their financial support. Your wrongful death lawyer may be able to help you determine if you are eligible for financial compensation by discussing your relationship with the deceased member of your family.
Protect Your Right to File a Wrongful Death Lawsuit
It takes time to prepare and file a claim for financial compensation resulting from the wrongful death of a loved-one. Your wrongful-death lawyer will need to take time to collect evidence, identify witnesses, locate them, and conduct interviews.
It may be necessary for your lawyer to schedule depositions, locate expert witnesses and gather all of your medical records. While your lawyer for wrongful deaths builds your case, you may need to take time off from work in order to focus on physical and emotional healing.
There is a specific time limit in each state that you must meet to file a successful claim for wrongful deaths. Your lawyer can tell you what this time limit is called. Your lawyer may be able to help ensure that the statute of limitation on your case doesn’t expire, which could result in you losing your right to bring a wrongful-death case.
We Can Help You Maximize Your Wrongful Death Settlement
You can receive a significant financial settlement if you win a wrongful death lawsuit. The financial settlement you receive is only the beginning of the process to replace the income and support that you lost after losing your loved one. You may need help understanding why wrongful death settlements are taxed versus not and how to maximize the settlement proceeds.
Our wrongful death lawyers can help you maximize your settlement and extend the life of your award. Contact Tenina Law Law by calling 213-596-0265.
Reach out today to initiate a conversation about your case and how we can assist you.
