The death of a loved one can be difficult to bear, but what’s worse is if it was brought by wrongful circumstances. After you’ve gone through a stressful process, you would have probably received your wrongful death settlement, but what’s next?
Where does the money go? Will your family be able to keep all of it, or will you have to think about taxes? In this article, we’ll be answering these questions about wrongful death settlements so you will know what to do next.
What Is a Wrongful Death Settlement?
Wrongful death settlements have multiple portions involving taxable and non-taxable elements. It constitutes compensation you will receive for the costs related to the injury and the death, including the medical bills in question.
A wrongful death settlement has three main parts: economic damages, non-economic damages, and punitive damages. Here are all you need to know about them.
1. Economic or Pecuniary Damages
Economic damages may refer to losses incurred due to the death of your loved one. For instance, it covers costs from the procedures they went through and all accumulated expenses throughout their hospital stay. Make sure that you have all of the records at hand so you can provide them to your attorney.
Additionally, if your loved one is a contributing part of your household, their loss will lead to a loss of income. This can be deemed as pecuniary damage that can affect all of your lives moving forward. You can have your loved one’s salary computed so you can measure how much income you miss every month.
Now, all of these pecuniary damages are not considered taxable income. The compensation you receive for these costs will fully be yours.
2. Non-Economic or Non-Pecuniary Damages
Non-economic damages refer to the mental and emotional pain and suffering caused by the wrongful death of a loved one. After all, you lost a life companion and a significant part of your support system. You may have had to seek psychiatric help to deal with trauma and its aftermath. All of these require compensation.
All of the compensation you receive for non-economic damages are classified as non-taxable income. You should not pay taxes for the money awarded to you, and should you be demanded to do so, talk to your lawyer right away.
3. Punitive Damages
When you win your settlement, some of the amount awarded to you will come directly from the pockets of the defendant. The payment is deemed punishment because they were responsible for your loss, though, of course, no amount can make up for what happened to you and your family.
Since this amount does not qualify as direct compensation for your loss, it is considered taxable income. You can consult your lawyer to help identify the punitive damages and meet your tax obligations.
Wrongful death cases can be lengthy, but this lawsuit can compensate you for the suffering you had to endure and the unfortunate event that caused your loved one’s wrongful death. Your case will come with a lot of paperwork and preparation, and after the case is settled, you will have to work out what your tax obligations are. Fortunately, working with an experienced personal injury lawyer can help you handle the process and do it right.
If you are looking for a personal injury lawyer in DC, work with us at Zukerberg & Halperin. We are top-rated personal injury attorneys that service Maryland, Virginia, and Washington DC. Book an appointment today, and let’s discuss your case.