The Internal Revenue Service (IRS) states that wrongful death lawsuit settlements are not taxable because they are not considered a source of income. The IRS does not tax wrongful death settlements because it categorizes them as claims resulting from physical illness and personal injuries.
When you lose a loved one to someone else’s negligence, carelessness, or recklessness, it brings pain and suffering to the family members of the deceased. All you can do is file a wrongful death lawsuit to help recover compensation for the damages incurred. After building a solid case and proving a party is liable for your loved one’s death, you will typically receive financial compensation to get you by.
How Wrongful Death Settlements are Determined
Families are affected both financially and emotionally after the untimely death of a loved one. In South Carolina and Georgia, you can recover economic and non-economic damages in this situation. Economic losses refer to damages that can be quantified, including the deceased person’s earning capacity. On the other hand, non-economic losses refer to ones that are intangible, hence cannot be easily estimated. The economic damages after a wrongful death may include:
- Funeral and burial expenses
- Loss of household income or inheritance
- The medical costs associated with treating the deceased before they passed away
The non-economic losses following the death of a loved one include:
- Loss of companionship
- Mental anguish
- Loss of emotional support
In some cases, the court may seek to punish the defendant further by ordering that they pay punitive damages. As opposed to economic and non-economic damages, punitive damages are designed to punish the offender and warn the public to refrain from committing such offenses.
Understanding the Taxable Portions of a Wrongful Death Settlement
Some circumstances can complicate the question as to whether these types of settlements are taxable or not. In some instances, the IRS can tax your settlement portions, including:
- If you received a part of your settlement in previous years for medical bills of the deceased, the IRS might deduct it from your final settlement.
- If the IRS determines that the emotional distress you experience and for which you received compensation did not result from a personal injury or illness, they might tax some amount from your final wrongful death lawsuit settlement.
- If a court awards punitive damages, the IRS might deduct the amount from your settlement.
For a better understanding of how each portion of your wrongful death settlement classifies and how it is taxed, you may want to get in touch with an attorney who handles wrongful death.
Who Can File a Wrongful Death Lawsuit?
If you lost your loved one in circumstances that suggest someone was reckless, careless, or negligent, you can file a wrongful death lawsuit. However, not every relative of the deceased can file this claim; this person must be:
- A surviving spouse
- Either a biological or adopted surviving child who is younger than 25 years
- A surviving biological parent
- Either a biological or adopted sibling
How to Ensure You Receive a Sufficient Settlement
A wrongful death lawsuit is not always easy to win because of the stakes at hand. For that, you may want a wrongful death attorney to help you gather evidence and identify, locate, and interview key witnesses.
To help develop a compelling case, your lawyer might need some time to locate expert witnesses, collect all your medical bills, and schedule depositions as required by the law. This is something that you might not want to tackle alone. After all, you and your family have been through enough. A lawyer will be glad to manage every aspect of your case; it’s their job.
You deserve to properly mourn your loved one with family. A lawyer will work for you and keep you updated and informed.
How Much does a Wrongful Death Attorney Cost?
At George Sink, P.A. Injury Lawyers, we work on a contingency-fee basis – we only get paid if we successfully help you recover compensation after the wrongful death of a loved one. We understand what you have endured, and we want to make everything as easy as possible.
If you receive a settlement, we only take a reasonable percentage of your compensation to cater to our services. You never pay us up front or out of pocket. There are no financial risks when you team up with us.
Call Us Today to Discuss Your Wrongful Death Case
There are some instances where the IRS might deduct some money from your settlement. This includes cases where you already took money to cater for the deceased’s medical costs or the court-awarded punitive damage compensation.
To understand how your wrongful death lawsuit settlement might be taxed, hiring a wrongful death attorney from our firm can help. Call (888) 612-7001 today for a free consultation with a team member.