Settlements for the wrongful death of a family member are usually large sums of money. Before we start talking about settlements, do you even know what wrongful death is?
It is a death caused by another human being. Or caused by another unfortunate situation or culprit. Even in such circumstances, when others are to blame for the death of a loved one. The family can take legal action for damages to be paid by the insurance company. Or organization of the person responsible.
More about ”wrongful death” topic you can find HERE.
This means that damages are often substantial and limited by the maximum allowances of the insurance policy itself.
Typically, a wrongful death settlement will not be considered income. For this reason, in most cases, the amount will not be taxed, according to the Internal Revenue Service (IRS).
What part remains tax-free?
In such sad cases, there are some parts after the death, i.e. parts of the settlement and compensation that will be exempt from tax. The parts that will be exempt from tax are the following:
- Compensation for physical illness or injury
- Reimbursement for all medical expenses
- Compensation for emotional distress as a result of injury or illness
- Compensation for lost wages due to injury or illness.
- If you consider the costs of treatment. Then these costs are reimbursed in the settlement.
Are punitive damages taxable in wrongful death cases?
Unfortunately, the amount awarded to the family as compensation after the loss has been incurred and proof of wrongful death is considered taxable income.
What examples can be taxed?
- Emotional stress,
- Violation of privacy,
- Discrimination,
- Harassment
- and similar.
Each case is unique, and some variables may come into play when determining whether or not awards in a wrongful death lawsuit will be taxable.
What is wrongful death lawsuit and how to deal with that? Check HERE.
How to minimize taxation?
The IRS usually follows the judge’s distribution of those damages. You should make sure that the settlement awards how much of the wrongful death settlement is for compensatory damages and how much is for punitive damages.
The amount of compensation in such legal proceedings can easily climb into the millions of dollars. For this reason, many people wonder if they can avoid tax liability when they receive a settlement.
Contact us!
Nedim Ramic and Bajric & Ramic team of attorneys are here for you. And you should not hesitate to call us today for a free consultation. The time is of the esence. If you find these information above useful, but you have more questions regarding the subject. Or you just need legal help straight forward, give us a call. On 314 352 6800 and get free consultations today!
