Wrongful deaths can result from car accidents, medical malpractice, rideshare accidents, motorcycle crashes, or drunk driving crashes. The sudden loss of a loved one creates profound emotional and financial challenges for surviving family members.
Affected families have the legal right to pursue compensation for their losses caused by the negligent party. However, taxation can sometimes reduce the net value of a settlement or court award, affecting your recovery.
You should, therefore, work with a legal professional who can protect your rights after the incident. Our wrongful death lawyers at Lorenz & Lorenz understand the taxation laws that affect settlements.
We can guide your family in the process, document your losses, negotiate with insurers, and advocate in court to secure your rights.
Wrongful Death Settlements Key Takeaways
- Wrongful death settlements in Texas are generally non-taxable, though punitive damages and accrued interest may be taxable, impacting the net recovery.
- Eligible parties to file include spouses, children, parents, and legal representatives of the deceased.
- Payouts vary based on injury severity, age, dependents, available evidence, insurance limits, defendant negligence, and quality of legal representation.
- Filing a wrongful death lawsuit involves case evaluation, investigation, complaint filing, negotiations, and potential trial representation to pursue maximum compensation.
- Call a wrongful death lawyer to understand your rights and obligations.
Are Wrongful Death Lawsuit Settlements Taxable
The IRS does not tax compensatory damages awarded in wrongful death cases. This includes compensation for medical expenses, funeral costs, lost income, and loss of companionship. These funds aim to restore what was lost, not provide additional income, so they remain non-taxable under federal law.
Punitive Damages Are Taxable
Unlike compensatory damages, punitive damages, designed to punish defendants for egregious conduct, are considered taxable income. If your wrongful death settlement includes punitive damages, you must report this portion to the IRS and pay applicable taxes.
Interest on Settlements Is Taxable
Any interest accrued on your settlement amount from the judgment date until payment is taxable income. Courts may award interest for delayed payments, and this component must be reported on your tax return.
Structured Settlements Offer Tax Advantages
Families can structure settlements as periodic payments rather than lump sums. Properly structured settlements maintain tax-free status while providing long-term financial security. You should consult a wrongful death attorney and a tax professional to optimize your settlement structure.
They can also help you comply with IRS regulations, maximizing the compensation your family retains.
Who Can File a Wrongful Death Suit
In Texas, not everyone can file a wrongful death lawsuit. The law identifies specific family members and legal representatives who have the right to pursue compensation after a loved one's untimely death.
Spouses
A surviving spouse is the primary party eligible to file a wrongful death claim. They can seek compensation for the loss of companionship, emotional support, and financial contributions that the deceased would have provided. Spouses may also recover damages for the loss of consortium and the impact on marital life.
Children
Biological and adopted children of the deceased have the right to file a wrongful death lawsuit. Children can pursue damages for loss of parental guidance, care, and financial support. In cases where multiple children are involved, each may have a claim proportionate to their relationship and dependency on the deceased.
Parents
Parents may be eligible to file a wrongful death claim if the deceased was a minor or dependent. They can seek compensation for the loss of the child's care, guidance, and financial or emotional contributions to the household. Parents can also pursue damages for funeral expenses and other economic losses resulting from the death.
Legal Representatives
If no immediate family member is available or able to file, a legal representative or executor of the deceased's estate may bring the lawsuit. The claim by a legal representative consolidates claims for damages, including medical bills, funeral expenses, and lost income. They can also pursue damages on behalf of the deceased's estate and rightful beneficiaries.
What Is the Average Payout in a Wrongful Death Suit
The amount awarded in a wrongful death lawsuit varies depending on the circumstances of the death, the impact on surviving family members, and the strength of the legal case. While there is no average payout, several factors influence how much compensation families may receive.
Severity of the Deceased’s Injuries or Circumstances of Death
The nature and severity of the injuries leading to death are critical in determining the value of a wrongful death claim. Sudden, traumatic, or particularly violent deaths often result in higher settlements due to their profound emotional and financial impact on surviving family members. Severe injuries that can lead to higher claims include:
- Traumatic brain injuries
- Spinal cord injuries
- Multiple fractures or compound bone breaks
- Severe burns or disfigurement
- Internal organ damage
- Amputations
A wrongful death attorney can prove these injuries using medical records, autopsy reports, emergency room documentation, and expert testimony. Demonstrating the severity of the injuries establishes the extent of suffering endured by the deceased before death and underscores the loss to the family, justifying higher settlement values or court awards.
Age and Life Expectancy of the Deceased
The age of the deceased affects both economic and non-economic damages. A younger victim with many potential working years ahead may generate higher compensation due to the projected loss of income, career advancement, and future contributions to the family.
In contrast, an older individual nearing retirement may result in a lower economic component. However, they may still receive higher settlements due to non-economic damages, such as emotional distress and loss of companionship.
Number of Dependents
Families with multiple dependents who relied on the deceased for financial support generally see higher payouts. The compensation accounts for lost income, benefits, and the cost of supporting children, spouses, or other dependents. The more the economic reliance, the greater the potential value of the claim.
Availability of Evidence
Evidence is the foundation of all legal claims, including wrongful death lawsuits. The strength and quantity of evidence help establish liability and prove damages. The more evidence you have, the better your chances of receiving a higher settlement value.
A wrongful death attorney can enhance the value of your lawsuit using:
- Medical and autopsy reports
- Police crash or incident reports
- Eyewitness statements
- Surveillance or dashcam footage
- Employment and income records
- Insurance policies of the at-fault party
- Expert testimony on accident reconstruction or medical causation
- Photographs or video of the scene and injuries
Weak or insufficient evidence can reduce the value of a wrongful death claim. Without strong documentation and supporting records, insurers or courts may question liability or damages, often resulting in lower settlement offers or limited compensation for the family.
Insurance Coverage and Policy Limits of the At-Fault Party
The insurer of the at-fault party is the source of compensation for the negligent party. Therefore, the insurance coverage held by the negligent party can determine how much you receive in the wrongful death claim.
High coverage limits provide the opportunity for greater compensation, whereas minimal policies may cap recoverable amounts. A wrongful death lawyer can investigate multiple insurance sources to maximize recovery.
Degree of Negligence or Recklessness of the Defendant
Grossly negligent or reckless behavior, such as drunk driving or blatant safety violations, can enhance the value of your lawsuit. A judge may award you punitive damages to punish particularly egregious actions and deter future misconduct.
Legal Representation
Quality legal representation can enhance the value of a wrongful death lawsuit. Here's how a wrongful death attorney can enhance the value of your lawsuit:
- Conducting a thorough investigation and preserving evidence
- Accurately documenting economic and non-economic damages
- Identifying and pursuing compensation from all liable parties and insurance sources
- Negotiating aggressively with insurers to secure fair compensation
- Preparing the case for trial to strengthen leverage and potential awards
How to File a Wrongful Death Lawsuit
Losing a loved one due to someone else's negligence or wrongful actions is devastating. While no legal action can undo the loss, a wrongful death lawsuit can help you seek accountability and financial compensation.
The process of filing such a lawsuit involves multiple steps, which is why you should work closely with a wrongful death lawyer.
Here are the steps of filing a wrongful death lawsuit:
Initial Case Evaluation
A wrongful death attorney begins by conducting an evaluation of your case during an initial consultation. During the initial meeting, they will listen to the circumstances surrounding your loved one's death, review any documentation you have, and assess whether you have grounds for a wrongful death claim.
A wrongful death attorney can determine if negligence, recklessness, or intentional harm contributed to the death. They will also check whether your state's statute of limitations still allows you to file.
Most importantly, they can identify who has legal standing to bring the claim, as state laws vary on whether spouses, children, parents, or estate representatives can serve as plaintiffs.
Investigation
A wrongful death lawyer will launch an investigation into the circumstances of the death. The process involves collecting medical records, accident reports, witness statements, and any other relevant documentation.
The attorney may work with expert witnesses such as medical professionals, accident reconstructionists, or economists to testify on how the death occurred. The input of experts can also help to establish the value of your losses.
Investigation enhances the chances of success in your claim because wrongful death cases require substantial evidence to prove that the defendant's actions directly caused your loved one's death.
Filing the Complaint and Serving the Defendant
A wrongful death lawyer will prepare and file the formal legal complaint with the appropriate court. The complaint is a document that outlines the allegations against the defendant, the legal basis for the claim, and the damages being sought.
The document must meet specific legal requirements and deadlines that vary by jurisdiction. A wrongful death attorney ensures the defendant is properly served with the lawsuit papers according to legal procedures, which initiates the official legal process.
Negotiation and Settlement Discussions
Many wrongful death cases are resolved through settlement negotiations rather than trial. A wrongful death attorney can handle all communications with the defendant's insurance company and legal representatives.
They can use their negotiation skills to advocate for fair compensation that accounts for your current and future losses. An experienced wrongful death lawyer understands the tactics insurance companies use to minimize payouts, allowing them to pursue maximum compensation.
Trial Representation
If a fair settlement cannot be reached, a wrongful death attorney can prepare your case for trial. They must be ready for depositions, motion practice, and developing a compelling courtroom strategy. A wrongful death lawyer will present evidence, examine witnesses, and argue your case before a judge or jury.
They are ready to use the lawsuit to pursue compensation and justice that your family deserves.
A Wrongful Death Lawyer Can Maximize Your Recovery
Although wrongful death settlements provide financial support, taxes and legal rules can reduce the compensation your family receives. For example, if a settlement includes interest accrued on a delayed payout, that portion may be subject to taxation.
Our skilled wrongful death lawyer at Lorenz & Lorenz has years of experience representing families affected by wrongful deaths. We can help you overcome these challenges, ensuring all damages are properly documented and pursued.
Contact us online for a free case evaluation.
Wrongful Death Settlements Frequently Asked Questions
What are the Chances of Winning a Wrongful Death Suit?
A skilled wrongful death lawyer can improve your chances by investigating evidence, identifying liable parties, and calculating damages accurately. They can also negotiate with insurers and present compelling arguments in court, ensuring maximum compensation for your loss.
How Long to File a Wrongful Death Lawsuit?
Wrongful death lawsuits have strict time limits, known as statutes of limitations, which vary by state. In Texas, you have two years from the date of death to file. Missing this deadline permanently bars your claim.
How Long Does a Wrongful Death Lawsuit Take to Settle?
A wrongful death lawsuit can take a few months to several years to settle. Factors influencing the timeline include the nature of the injury, the number of parties involved, insurance responsiveness, evidence strength, the negotiation process, and whether the case proceeds to trial.