If you are considering filing a wrongful death claim or are already in the process, you will need to know whether that money is taxable. You will need to consider both state and federal laws when it comes to the taxation of your settlement.
If you have any questions, then we are here to help. We offer a free consultation to anyone who needs it, and we will always treat your case with sensitivity and understanding.
If you are still deciding if a legal battle is the right option for you, then you should still give us a call. You are in no obligation to continue representation after receiving free advice. We know that no amount of money can ease the trauma you are experiencing, but at the very least, it can take away the financial stress you may be experiencing.
Contact The Law Place today for a free case evaluation at (941) 444-4444.
What Is a Wrongful Death Case?
If you are at the beginning of your journey, then you could still be unsure exactly what wrongful death means. Wrongful death in Florida is outlined in Florida Statute 768.19, which basically states that your loved one’s death was preventable and caused by someone else’s negligence.
Common examples include car accidents, slip and falls, medical malpractice, and violent crimes. If you are unsure whether you have grounds for a wrongful death claim, then you should speak to a lawyer quickly. The sooner, the better, as they can work quickly to gather evidence and build a strong case.
In a successful wrongful death claim, you may be able to claim damages for both financial expenses that you have suffered because of your loved one’s death and your emotional suffering. You could receive compensation for medical bills, your loved ones lost wages and future lost wages, funeral expenses, and damages designed to compensate you for your mental anguish.
For a free legal consultation, call 941-444-4444
Is There State Income Tax on Wrongful Death Settlements in Florida?
There is no income tax on wrongful death settlements in the State of Florida.
Is There Federal Income Tax on Wrongful Death Settlements?
Wrongful death settlements can be subject to federal income tax, depending on what the money is designed to cover.
- Physical injuries – Usually, compensation for costs of physical injuries, including medical expenses, are exempt from any taxation. However, if you took a deduction on the medical expenses you received compensation for, you must include your settlement as income.
- Pain and suffering – Damages for the pain and suffering someone experienced from the time they were injured until their death is also exempt from taxation, so long as the emotional distress was a result of the physical injury.
- Lost wages – Usually, compensation for lost wages will be subject to tax in the way wages would be.
- Interest on your settlement – Any interest you make on your settlement should be reported as income.
- Punitive damages – If the court awarded punitive damages in your case, which are designed to punish the perpetrator rather than compensate the victim, you would also need to report these as income.
An Example of Settlement Taxation
For example, let’s say that Janice lost her husband, John, when he was hit by a drunk driver and died shortly after arriving in hospital.
All drivers owe a duty of care to other road users to take steps to keep those around them safe. The drunk driver was clearly in breach of this duty, which clearly led to John’s death. Therefore, Janice can claim compensation in a wrongful death claim.
Janice is awarded damages, some of which are taxable, and some aren’t.
- Her husband’s medical expenses: non-taxable.
- Her husband’s lost wages and lost earning capacity (the amount he could have been presumed to earn in his lifetime if he had not died): taxable.
- Her husband’s pain and suffering (physical pain and mental anguish from the time they were injured and their death: non-taxable.
- Janice’s emotional distress: taxable (because it did not result from her own physical injury).
- Punitive damages: although there are exceptions, these are usually taxable.
- Property damage: usually not taxable.
Can I Avoid Paying Taxes on My Wrongful Death Settlement?
While you cannot avoid taxes completely, to some extent, you can designate how much of a settlement is awarded under which type of damage.
Of course, you cannot simply claim $5,000,000 in medical bills and $10 in emotional distress just to avoid taxes. However, you may be able to push for more damages in things like your loved ones’ pain and suffering, which are not taxable.
For example, Janice files a wrongful death lawsuit following her husband’s death in a car accident. She accumulated damages that included medical bills, her emotional distress, and his pain and suffering. Her claim is worth $1,500,000. In the settlement documents, the damages are allocated as follows:
- $300,000 in punitive damages
- $200,000 for her emotional distress.
- $300,000 for her husband’s pain and suffering.
- $300,000 for her husband’s medical bills.
- $300,000 for her husband’s lost wages and lost earning capacity.
In this example, her emotional distress, her husband’s lost wages and earning capacity, and the punitive damages are taxable, which means $700,000 is taxable, and the other $800,000 is not.
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How Are Wrongful Death Settlements Paid Out?
Wrongful death settlements are paid either as a single lump sum or a structured payment. You should consider which is best for you.
A lump-sum payment is where your settlement is paid as a single lump sum. This can be helpful for people who need to pay large bills. A lump-sum payment can be rolled over to an Individual Retirement Account (IRA) and avoid taxation when you receive it. However, any distributions from the IRA will be taxed as ordinary income. If the money isn’t rolled over, you’ll pay ordinary income tax on taxable damages, which could put you in a very high tax bracket.
A structured settlement involves continuous, ongoing payments. They might be monthly, quarterly, or yearly depending on your needs. They can also start higher to allow you to pay for bills and dependent children, and then reduce over time. They can also gain interest and increase with inflation. This is the best option for most people. An attorney can help you work a structured payment that is best for you.
How Do I File a Wrongful Death Claim?
Filing a wrongful death claim in Florida can be complex, and when you are suffering the loss of a loved one, the process can quickly become overwhelming. When you seek help from an attorney, they can take over the legal process, including talking to insurance companies and gathering evidence on your behalf.
A wrongful death claim must be filed by a personal representative for the decedent’s estate. They file a claim that results in damages for both the estate and surviving family members.
How Much Will a Wrongful Death Attorney Cost?
Often, even with lawyer fees taken into account, having attorney results in a higher settlement. At The Law Place, we work on a contingency basis, monitored by The State Bar Association. That means that we only take a fee from your eventual settlement if you are successful. You do not pay anything upfront, and if we are unsuccessful, then we will not take anything.
Everything will be agreed upon before you agree to compensation, so you will not be left with any surprises.
How Long Do I Have to File a Wrongful Death Claim?
The statute of limitations sets time limits on filing claims. For personal injury claims, you have four years from the date of the incident that caused your injury to have a claim.
Following the death of a loved one, you just have two years, as per Florida Statute 95.11.
Whatever the cause of your loved one’s death: negligence, defective product, medical malpractice, or an intentional act, you should speak to a wrongful death attorney at our firm as soon as possible.
The sooner you have a lawyer gathering evidence in your case, the stronger it will be and the more likely you will be to gain compensation. Witness memories fade, CCTV is deleted, vehicles are fixed, the more time that passes, the more difficult it could be.
Remember, the person at fault for your loved one’s death does not need to be found guilty of any crime in order for you to start a wrongful death lawsuit. The burden of proof in civil claims is lower, which means regardless of the outcome of a criminal trial, you can still make a claim.
Call a Wrongful Death Lawyer Today
Taxation on wrongful death settlements is complicated, and you should speak to a tax professional to ensure that you are meeting federal tax requirements.
While we cannot give you advice on avoiding taxes, we can help you secure the best settlement possible to cover your losses.
Find out more about how we can help in a free consultation. Contact us now at (941) 444-4444.