Are Wrongful Death Settlements Taxable?
if your loved one was killed in a car accident and you won a wrongful death lawsuit, the money you receive might be taxable. In addition to compensatory damages, a wrongful death settlement can also include punitive damages. These are awarded to punish the defendant for criminal wrongdoing. In addition, you may also be entitled to receive general damages. If you did not suffer the injury or illness, these damages aren’t part of the compensation you receive.
Punitive damages are rewarded to punish the defendant for criminal wrongdoing
In civil lawsuits, punitive damages are awarded to punish the defendant for their wrongful actions. These damages require a higher standard of proof than exemplary damages. Plaintiffs must prove that the defendant acted with egregious or reckless disregard for the plaintiff’s health or safety to receive punitive damages.
In wrongful death settlements, punitive damages are awarded in addition to compensatory damages. The amount of punitive damages is decided by the jury. Most states instruct juries to consider various objective and subjective factors in determining whether the amount of punitive damages awarded is excessive. These factors include the reprehensibility of the defendant’s actions, the defendant’s wealth, and the nature of the plaintiff’s injury.
General damages are rewarded to you if you did not suffer an injury or illness yourself
General damages refer to damages that flow naturally from the wrongful act. They have a direct connection to the injury or illness that the plaintiff suffered. Examples of general damages are: physical pain, mental suffering, and mental anguish. Physical pain can result from a fall, car accident, altercation, or injury. Mental suffering includes emotional and mental trauma, depression, and anxiety.
There is no precise monetary value for general damages. Judges often leave the determination of general damages up to the jury, and the process depends on many different factors.
Interest on wrongful death settlements is taxable
If someone has killed your loved one in a negligent act, you may be entitled to file a wrongful death claim. A successful case can bring thousands or even millions of dollars in compensation. If you receive this money, you may be required to report the income and pay taxes on it.
Taxable portions of wrongful death settlements include accrued interest and punitive damages. The IRS generally follows the judge’s ruling on the amounts. The IRS allows wrongful death plaintiffs to claim lost support from the date of injury until death, as long as that amount is accompanied by interest. Many survivors can also seek money damages for the future loss of services or support.
So, are wrongful death settlements taxable? Sometimes yes and sometimes know, depending on some factors. But, in most cases, they are taxable. It is important to work with an attorney to figure out if this is the case. If you have to pay taxes for the settlement, the amount you need to be offered during the trial should be high enough to cover those taxes. It is easy to miss out on this as you calculate the worth of your claim.