Tax Penalities For Wrongful Death Settlements  

What is wrongful death that entitles relatives to claim compensation? A wrongful death is a civil action initiated by the relatives of the deceased against a defendant who they hold liable. The claim falls within the jurisdiction of common law. In the United States, the standard of proof is preponderance of evidence.

With this in mind, tort or civil action becomes an easier route for relatives to seek retribution against someone they believe was responsible for the death of a family member. But this works two ways. A person is liable for criminal prosecution and can also be subjected to a civil action to prove wrongful death. For wrongful death it is incumbent on the relatives to prove that it was so occasioned because of the defendant’s negligence and in whole or part by his conduct that the death was caused.

With regard to taxes, it has been held under federal law that amounts received for physical personal injuries (including wrongful death) are not liable to taxes. Punitive damages though, attract tax. However if punitive damages were awarded before September 1995 under a state’s wrongful death statutes which were in effect at the time, then such damages are excluded from the ambit of taxation.

Unless proved otherwise, a wrongful death settlement is deemed to be part of a decedent’s estate and in the normal course would be included for estate tax purposes. In 2008 the federal exemption, including a settlement, was $ 2 million.

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Wrongful-Death-Settlement-And-Minor-Trusts      Wrongful death can occur as a result of many different kinds of negligence, including auto accidents, motorcycle accidents, large truck accidents, medical malpractice, construction site accidents, defective products, SUV rollover, and pedestrian accident. More..

 


 

 

 
   
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