• Apr
    11
    Posted in:
    Posted by: Jarve Kaplan Granato Starr

    Wrongful Death Settlements: How are They Determined, Distributed, and Taxed?

    Wrongful Death Settlements

    When a person’s death is the result of someone else’s negligence, their survivors are able to file a wrongful death lawsuit seeking financial compensation for the damages that they suffered. Though it is difficult and uncomfortable to place a monetary value on a human life, doing so is often necessary to ensure the financial security of those left behind, as well as to make sure that they receive some sense of closure and justice. When the parties decide to settle the issue out of court, they use many factors to determine the amount of compensation, including the deceased person’s age and earnings capacity, their income and the value of their benefits at the time of their death, the circumstances of the dependents who have been left behind, and the costs associated with the death, including medical bills and funeral and burial expenses that were incurred.

    After the amount of compensation is agreed upon, it is distributed to the individual’s survivors who filed the wrongful death lawsuit. Every state has its own rules regarding the distribution of these damages. Below you will find the distribution rules for the states of Pennsylvania and for New Jersey, which are based on each state’s laws for when a person dies without a will:

    Pennsylvania

    • Where there is only a surviving spouse, with no children or parents, all damages go to the spouse.
    • Where there is a surviving spouse, surviving parent or parents and no children, the spouse gets the first $30,000 and half of what remains, with the other half split equally between the surviving parents.
    • Where there is a surviving spouse and surviving children, the spouse gets the first $30,000 and half of what remains. Children of the surviving spouse split the other half equally.
    • Where there is no surviving spouse and there are surviving children, the entire settlement gets divided equally among them.
    • Where there are surviving parents and no surviving children or spouse, the entire settlement gets divided equally between them.
    • Where there is no surviving spouse, children or parents, the settlement gets divided equally between the deceased’s siblings, nieces, and nephews.

    New Jersey

    • Where there is only a surviving spouse, with no children or parents, all damages go to the spouse.
    • Where there is a surviving spouse, surviving parent or parents and no children, the spouse gets the first $50,000 and half of what remains, with the other half split equally between the surviving parents.
    • Where there is a surviving spouse and surviving children, the spouse gets the first half of the settlement, plus another $50,000 if the surviving children are hers. The children split the balance equally.
    • Where there are surviving parents and no surviving children or spouse, the entire settlement gets divided equally between them.
    • Where there is no surviving spouse, children or parents, the settlement gets divided equally between the deceased’s siblings or their descendants.

    Many people who file a wrongful death lawsuit worry about the tax ramifications of a large settlement. The IRS considers any compensation for physical illness or injury non-taxable. This includes compensation for pain and suffering. However, compensation for punitive damages, emotional distress, and lost wages are taxable.

    If you feel a loved one’s death was the result of negligence and want to consider a wrongful death suit, you need an experienced attorney. So, contact our offices today to discuss what we can do for you.

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