When you receive your wrongful death settlement for your loved one’s death, you can use the money to pay off essential costs like outstanding medical bills. So knowing whether your wrongful death settlement is subject to taxation can give you a better idea of how to use the settlement.
Our team of wrongful death attorneys at the Buzbee Law Firm can help you with all aspects of your wrongful death lawsuit, from filing to understanding how much of your settlement is taxable. We can also work to decrease the portion of your settlement that is taxable so that you can keep more of your settlement.
Wrongful Death Lawsuits Are Overall Non-Taxable
According to the Federal Register, IRS Rule 1.104-1, settlements from wrongful death suits cannot be taxed. The government defines this type of settlement as a part of a claim for personal injury instead of income.
If you’ve recently lost a loved one, this may come as a relief to you. After dealing with endless paperwork and bills, you can rest easy knowing that a majority of your settlement is not subject to taxation. While a majority of your settlement can’t be taxed, there are some aspects of your settlement that can be taxed that we’ll discuss.
If you have not filed a wrongful death suit for your loved one yet, one of our wrongful death attorneys can help you start filing your claim. We’ll help you gather evidence, file your claim, and fight for the majority non-taxable settlement you deserve.
The Damages Survivors Can Receive in a Texas Wrongful Death Lawsuit
When you lose a family member, it’s a devastating time, and our attorneys understand that. And it’s important that you are aware of the damages that you and other family members can receive. To qualify as a survivor of your loved one, you must be one of the following in relation to the decedent:
If you qualify, you’ll be able to collect damages for the loss of your loved one. In order to recover these damages, you must file a wrongful death claim within two years of your loved one’s death.
In a wrongful death case, you can collect the following damages:
- Loss of earning capacity
- Loss of care, support, advice, and counsel that your loved one provided
- Loss of inheritance
- Mental pain and anguish
- Punitive damages
Our team of compassionate attorneys can help you understand what damages you can recover in your specific wrongful death case. In wrongful death cases, the defendant and their lawyer may try to obscure damages that you rightfully deserve. Our wrongful death lawyers will work hard to find all the damages that you qualify for.
Types of Damages in a Wrongful Death Suit That Are Taxable
When you file your wrongful death claim, or you receive your settlement, most of it is untaxed. But there are a few different parts of it that can be subject to taxation. Here are some of the parts of your settlement that are taxable:
Any Punitive Damages
If a judge awards you with punitive damages, the IRS can tax this type of damage. Punitive damages serve to punish the defendant for their actions by demanding them to pay a large sum of money. This type of damage is most commonly awarded in cases where there is gross negligence.
If your settlement consists of a large portion of punitive damages instead of compensatory damages, most of it will be taxable. But if the majority of your settlement is compensatory damages, most of it is untaxable.
For example, let’s say you receive a settlement of $10 million and $6 million of it is compensatory, while $4 million of it is punitive damages. The $6 million of it will not be taxable, but the $4 million will be.
Emotional Distress Awards
When you receive emotional distress compensation for the loss of your loved one, it can be taxed depending on the specifics of your case. If the emotional distress was not a result of your loved one’s personal injury or illness, your award would be taxable.
One of our wrongful death lawyers can help you determine if your emotional distress award is taxable or not.
In some wrongful death cases, the settlement will have accrued interest that will add up over time. This often happens when your case gets appealed and requires the insight of a higher court. If your case is appealed, you may have prejudgement interest and post-judgment interest.
While this interest adds value to your case, this accrued interest on your wrongful death case is taxable. As a result, it will be deducted from your settlement. We understand that this may be confusing, so our attorneys can explain how accrued interest will affect your specific case.
Please keep in mind this is not an exhaustive list of all the parts of your wrongful death settlement that can be taxed. If you have any questions about what aspects of your wrongful death settlement are taxable, our lawyers can answer them.
Get Your Full Wrongful Death Settlement With the Buzbee Law Firm
Losing a loved one and having to go through a wrongful death lawsuit is never easy. Without a lawyer, you may be overwhelmed when your settlement gets taxed. But with our team of wrongful death attorneys at the Buzbee Law Firm, we can tell you what parts of your settlements will be taxed.
If you’ve recently lost someone in your family, our lawyers can help you get justice and work for a majority, non-taxable settlement. To start your free consultation today, give us a call or fill out the contact form on our website.