No one prepares to lose a loved one. Unfortunately, it happens every day. A wrongful death settlement can provide grieving family members with the lifeline they need to get things back on track.
But some people are leery of receiving a large windfall of money. After all, the IRS requires you to report all of the income you earn over the course of a year and pay taxes on that income. The thought of this tax bill might make a wrongful death claimant think their claim is not worth the trouble.
In many cases, this is inaccurate. Only certain forms of damages are taxed by the IRS.
Before you decide not to file a wrongful death suit, make sure you talk to a wrongful death attorney about whether your settlement is taxable. We can help walk you through the IRS requirements regarding wrongful death lawsuit settlements so you understand what income needs to be reported. Contact The Larsen Firm today to schedule your free initial consultation.
Survival Action vs. Wrongful Death Action
Wrongful death means that someone died as a result of the negligent or wrongful act of someone else. A wrongful death claim is designed to compensate eligible family members for the financial losses they suffered due to their loved one’s death. Thus, the wrongful death claim does not include legal claims that could have been raised by the decedent—like pain and suffering—stemming from the accident or medical bills. Instead, the wrongful death suit compensates the family for things like funeral expenses, the loss of the decedent’s contribution to the household, and the loss of future financial support from the decedent. While it is impossible to assign a dollar value to your loved one’s life, a wrongful death suit aims to compensate you to some degree for the financial impact of losing a loved one.
A survival action, on the other hand, is a claim brought on behalf of the deceased for medical expenses and lost wages they would have received in an injury lawsuit if they had not died in the accident. Survival actions arise when the decedent does not die right away from their injuries suffered in the accident. The award, if any, is distributed according to the terms of the decedent’s will, if they had one. If they did not, the award is distributed under intestacy laws.
A seasoned wrongful death attorney can help you understand who qualifies to file a wrongful death lawsuit and a survival action. The Larsen Firm has experience handling numerous wrongful death and survival actions throughout California. Contact us today to schedule an appointment.
Who Can Bring These Causes of Action?
The individuals who qualify to bring a wrongful death suit are outlined by California law. Those individuals include:
- The decedent’s spouse,
- The decedent’s children,
- The decedent’s domestic partner, or
- The descendants of any of the decedent’s children if those children are no longer living.
The decedent’s estate brings a survival action.
Are Survival Action Settlements Taxable?
Whether a survival settlement is taxable depends on what kind of damages you receive. Lost wages and medical bills are considered compensatory damages. That means they compensate for a loss suffered by the decedent, like their medical expenses. These damages are not taxable.
However, in California, a judge can award punitive damages in survival actions if they find that the defendant acted with extreme recklessness or caused intentional harm. Instead of compensating the victim’s losses, punitive damages punish the responsible party for their misconduct and attempt to deter the repetition of their behavior. Punitive damages are taxable.
Are Wrongful Death Lawsuit Settlements Taxable?
While some parts of a survival action settlement are taxable, you might be wondering, Are wrongful death lawsuit settlements taxable? California does not allow punitive damages awards in wrongful death cases. Thus, wrongful death awards are typically not taxable.
According to the IRS, portions of a settlement or judgment that are “compensatory” are not taxed. That is because compensatory damages aim to reimburse you for the damages you suffered due to your loved one’s death. Compensatory damages in a wrongful death lawsuit might include:
- Funeral costs;
- Loss of financial contributions from the decedent;
- Loss of consortium;
- The reasonable value of the decedent’s household services;
- Loss of love, support, and companionship; and
- Loss of guidance and training.
Therefore, you do not need to worry about incurring a large tax bill if you receive a wrongful death settlement. If your loved one died due to someone else’s negligent or wrongful act, contact The Larsen Firm immediately.
We understand that processing the death of a loved one can take longer than expected. Let us handle the ins and outs of your wrongful death claim while you focus on spending time with your family.
The Larsen Firm: Your California Wrongful Death Law Firm
Dealing with the passing of a loved one is never easy, especially when their death was the result of the wrongful or negligent actions of someone else. And while nothing can bring them back or undo the pain you’ve suffered, a wrongful death settlement can be a great start toward moving forward.
If you have considered filing a wrongful death action in California, speak with a wrongful death lawyer as soon as possible. An attorney can help you navigate your wrongful death lawsuit and answer your questions. Some reasons our clients hire our firm include:
- We will hold wrongdoers accountable for their actions.
- We have a 99% success rate with wrongful death claims throughout California.
- Over $950 million dollars recovered for clients injured or killed due to the negligent acts of others.
- Your case will receive our full undivided attention due to our firm’s size.
- Bestlawyers.com recognized The Larsen Firm as 2021/2022 Best Lawyers.
Hiring a wrongful death attorney gives you the best opportunity to secure the largest settlement offer possible. Our team is confident that we have what it takes to represent your case effectively and recover the full amount you deserve. When you are ready to discuss your case, give us a call for your free consultation and see how we can help fight for you.