Wrongful Death Settlement

How Does A Wrongful Death Settlement Get Distributed...

New postby Shila » 25 Oct 2012, 20:55

How does a wrongful death settlement get distributed through intestate succession in Texas? How does a wrongful death settlement get distributed through intestate succession in Texas?
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New postby Erwin » 25 Oct 2012, 20:55

In my state, Pennsylvania, there are two separate actions, a wrongful death action and a survival action.

A survival action is an action belonging to the decedent's estate, and the damages recovered in a survival action are subject to estate and inheritance taxes and to the claims of creditors. The damages in a survival action are distributed according to the decedent's will if he died testate or according to the intestate laws if he died intestate.

A wrongful death action belongs to the designated beneficiaries. The action does not belong to the estate. Damages are not subject to estate or inheritance taxes or to the claims of creditors and are distributed according to the intestate laws regardless of whether there is a will.
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Do I pay inheritance tax on a court settlement for the...

New postby Tomasa » 25 Oct 2012, 20:55

Do I pay inheritance tax on a court settlement for the wrongful death of a child?

I'm a U.S. citizen living and working in Canada (therefore no U.S. income). I'll be getting a settlement for the wrongful death of our newborne child in 2002. I am apparently going to have to complete an "S2 Succession Tax" form. Does this mean that the money (which will be coming from the estate of my child) be considered an inheritance? How much tax will I have to pay on that?
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New postby Laura » 25 Oct 2012, 20:55

For US tax purposes, if all of the money is classified as compensation for wrongful death, it's not taxed as income either by the estate or by you.

If any of the money is classified as punative, then that portion is taxable as "other income."
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If you receive a settlement in a wrongful death claim.?

New postby Mitzi » 25 Oct 2012, 20:55

It is not taxed. How do you give some of the proceeds to your children without incuring tax obligations? It is not taxed. How do you give some of the proceeds to your children without incuring tax obligations?
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New postby Therese » 25 Oct 2012, 20:55

Ideally you would want the award to go directly to the child(ren). If they are minors it should go to them with you as trustee for the funds until they reach the age of majority.

If the funds go directly to you you are limited to gifts of $12,000 per year per recipient without incurring a potential Gift Tax liability. However, funds spent on care and support, including educational expenses, are not considered as gifts and do not trigger a Gift Tax event.
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If my mom wins a wrongful death settlement from her...

New postby Marisela » 25 Oct 2012, 20:55

If my mom wins a wrongful death settlement from her lawsuit, will she have to pay taxes on any money she gets?

My guess is (an unfortunate) "yes". She didn't think that she would have to pay taxes on lawsuit settlement money. I think that she is wrong. I would also like to know what percentage of the money would she have to pay in taxes?. Is it as high as when you win the lottery or other prizes? I would certainly hope not!
The lawsuit is against a nursing home. I have read other information on the internet that states that this kind of settlement money is taxable, but I was also curious about HOW taxable it is. I guess the government wants its share of everything. LOL
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New postby Donald » 25 Oct 2012, 20:55

It depends on the type of settlement that she receives. That will be determined in her final settlement agreement. But it does sound as if it will be taxable. Here is the IRS link referring to settlements. http://www.irs.gov/pub/irs-pdf/p4345.pdf
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Tax Liability - no 1099 received for wrongful death...

New postby Evelina » 25 Oct 2012, 20:55

Tax Liability - no 1099 received for wrongful death settlement?

Its after 1/31 and no 1099 rec'd for family settlement resulting from wrong ful death lawsuit which was settled last year by an arbitrator. There were no punitive damages. The claim was for negligence and resulting fall/death of our mother.
The attorney said we might have to report as income and made us fill out a W 9 form but he was unclear on whether it was reportable. He never sent 1099. Do we have to report this as income and pay taxes on this? with or without 1099? How is this different than when we received monies from our mother's estate that was not taxed.
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New postby Yoko » 25 Oct 2012, 20:56

Since the settlement was for physical injury or illness it's not taxable. You won't receive a Form 1099 and do not need to report any of it. Do keep copies of all of the settlement documents just in case some clueless attorney decides to cut a 1099 on this. The copies of the settlement documents will prove that the money is non-taxable.

While this is a separate issue from her estate, the tax treatment is the same: $0 for you.
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Do you pay income taxes on a wrongful death settlement?

New postby Kacy » 25 Oct 2012, 20:56

I have read numerous answers on this. The IRS rules seem very vague. The answer seems to depend on the claims which can be divided into 3 categories (1. Injury 2. loss income 3. Punitive). For Injury it seems that this is not taxable. For loss of income or services this might be taxed as had the person lived these things would be taxed. Punitive claims are certainly taxed. The big problem is that most settlements don't go into detail about what the settlement covers. Any attorney worth his salt would write out a settlement that would cover any and all claims and not go into detail about how each portion of the settlement is going to a specific claim. Maybe I am misunderstanding this thing completely.
My father income was from disability insurance which was not taxed.
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New postby Keli » 25 Oct 2012, 20:56

Actually you when you do a settlement, by law the attorney's must detail where every dollar goes to, where it is used, and how it is for the IRS so that it can be reported. When a settlement is done for instance on Injury or Pain and Suffering the money cannot be taxed. When settling a case, many take less money on the settlement to put it all into Pain and Suffering. However, Punitive damages are always taxes, so when we settle a case we have a tendency to try to get the damages especially in wrongful death put in different categories. Income Loss is always taxed, I know they claim its not, but they always tax it. So the long answer is any attorney would write it out to cover in specific categories, in most states it is actually unethical not to, and the attorney will be punished. If the attorney actually does not properly detail it, you may be taxed on all of the money.

Also it has an impact on how the payments are structured. Lump Sum payments versus a long term payment plan. Longer term plans you get less money but lower taxes because the lump sum tax increase is high.
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Wrongful death and insurance company settlement one in the..

New postby Maddie » 25 Oct 2012, 20:56

Wrongful death and insurance company settlement one in the same?

When you settle with the insurance company,is that a separate event from suing for wrongful death.(In wrongful death civil suit,your suing the other person right) or when you settle with the insurance company thats it.Or does it just free the insurance company from their part of liability.example I want to sue the other driver personally.
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New postby Lucas » 25 Oct 2012, 20:56

It depends on what the settlement agreement says. But the insurance company is probably trying to settle on behalf of their insured (the other driver).

There is no liability on the part of the insurance company. The insurance company didn't cause your damages. The insurance company would be required to pay only if their insured (the other driver) is found liable and even then, would only have to pay the limits of the insurance policy.

So, the answer is "No."
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What is a good settlement amount from an insurance company..

New postby Gail » 25 Oct 2012, 20:56

What is a good settlement amount from an insurance company for a wrongful death in a car accident?

My aunt was killed in a car accident by a drunk driver and now the insurance company is going to offer a settlement.
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New postby Elvia » 25 Oct 2012, 20:56

First, so sorry for your loss.
I am 100% sure the company will offer the policy limits. If this is a small amount, then her spouse or children or closest relative can put her policy on notice for underinsured motorists. Hopefully she had good limits (at least $300,000 or $500,000). If she had a personal umbrella policy with uninsured motorists coverage, the heirs can possibly go after that too. I sure would. Her insurance company will then go after the drunk driver personally to compensate them for any amounts they paid out (because they won't pay until his limits are exhausted, so he would pay the additional out of pocket if he has any assets and/or a decent job). Hate to say this but the younger & healthier she was, the more the settlement will end up to be. If she had a husband & children, the younger the children, the larger the settlement. If she was employed outside the home, the more she made the better the settlement.
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