Personal Injury Lawyer
When your loved one wrongfully dies, you deserve financial compensation to take that little bit of the burden off your shoulders. Because many wrongful death settlements are so large, surviving family members often wonder what their taxes are going to look like the following year. Do you have to pay taxes on a wrongful death settlement? The following should set things straight.
Any damages that are considered compensation for the victims in a wrongful death case are not taxable. Examples of compensatory damages include:
- Funeral and burial expenses
- The pain and suffering your loved one experienced before passing away.
- Lost wages your loved one would have brought to the family if he or she had not died.
- Loss of care, companionship, sexual intimacy and similar benefits.
- Medical bills incurred after the accident that led to the death.
In many wrongful death cases, the aforementioned damages are all that are received, so the whole settlement is tax free.
Unlike compensatory damages, punitive damages do nothing to compensate the victims. Instead, they are meant to punish the defendant because he or she had particularly offensive or bad behavior. For example, if the defendant purposely hit the deceased out of anger, and death was the result of that hit, he or she would be a candidate for paying punitive damages. You can see the difference between that type of criminal behavior and someone who accidentally hit someone in a crosswalk because he or she was blinded by the sun.
If you plan to receive a particularly large amount of money as a wrongful death settlement, you may not owe income taxes, but it’s possible you could owe estate taxes. Federal tax law in 2018 requires these taxes on estates valued at or above $11.18 million. While most wrongful death case settlements won’t get near that value, it’s always a possibility to be aware of when you’re thinking about taxes.
What to Do Next
If your loved one died because someone was negligent in any way, you shouldn’t have to suffer more than you’re already going to. Financial loss is a huge concern when a family member dies, and adding taxes to that is like adding fuel to the fire. Fortunately, most wrongful death settlements don’t require taxes be paid, though every situation brings different circumstances to the table. If you’re worried about your wrongful death lawsuit, contact a wrongful death lawyer in Trenton, NJ for help in understanding what you should do next.
Thanks to Davis & Brusca for their insight into personal injury claims and taxes for a wrongful death settlement.