If the settlement includes damages for “future lost earnings,” those damages may be subject to taxation.
When someone dies due to another person or entity’s negligence or intentional act, the family may file a wrongful death lawsuit. If the case is successful, they may receive a monetary settlement from the defendant. Wrongful death settlements are not taxable in Florida.
What is a Wrongful Death Lawsuit?
A wrongful death lawsuit is a type of civil action that can be brought against someone who has caused the death of another person through negligence or an intentional act. The purpose of these lawsuits is to hold the responsible party accountable for their actions and to provide financial compensation to the deceased person’s family.
What is a Settlement?
A settlement is a legal case resolution in which the parties involved agree to receive a certain amount of money (or other compensation) instead of going to trial. Settlements are typically paid by the defendant (or their insurance company) to the plaintiff (or their attorney).
Wrongful Death Settlements in Florida
In Florida, wrongful death settlements are not taxable. This means that the families who receive these settlements do not have to pay any taxes on the money they receive. This is true for both state and federal taxes. This is good news for families who are already dealing with the devastating loss of a loved one.
You may be entitled to file a wrongful death lawsuit if you have lost a loved one due to someone else’s negligence or intentional act. It would be best if you spoke to experienced Lakeland wrongful death attorneys to learn more about your legal rights and options.
Types of Settlements in Wrongful Death Lawsuits
The first thing to understand is that monetary damages from a lawsuit are generally not taxable. This includes both compensatory and punitive damages. Therefore, if a wrongful death settlement is for compensatory damages, it should not be taxed.
Compensatory damages include medical expenses, funeral costs, lost wages, and loss of companionship. They are intended to reimburse the family for their losses and are not considered income. For example, if a family receives a settlement of $100,000 for medical expenses and funeral costs, they will not have to pay taxes on that money.
Punitive damages are designed to punish the defendant and deter future misconduct. These can sometimes be large sums of money, but they are still not taxable. Punitive damages are awarded if the defendant’s actions were particularly egregious.
For example, if the defendant caused a fatal accident through drunk driving or speeding, they may be ordered to pay punitive damages.
So far, so good – it seems like all wrongful death settlements would fall into either of these categories and would not be taxable. However, there is one exception to this rule. If the settlement includes damages for “future lost earnings,” those damages may be subject to taxation.
Lost future earnings are what they sound like, the money the deceased would have earned if they were not killed. For example, if a young person dies in a car accident, their parents may sue for the lost wages the child would have earned over their lifetime.
The reason lost future earnings is taxed is because they are considered “income” in the eyes of the IRS. The IRS views them as money that was earned but never received – and therefore, they should be taxed just like any other income.
If a wrongful death settlement includes damages for lost future earnings, those damages will be subject to taxation. The good news is that there are ways to minimize the tax burden on these settlements. An experienced attorney can help you structure your settlement to minimize the taxes you will owe.
Seek Legal Help
Wrongful death settlements are not taxable in Florida. This includes both state and federal taxes. The only exception to this rule is if the settlement includes damages for lost future earnings. In that case, the taxes will be due on those damages. However, there are ways to minimize the tax burden on these settlements. Consult a legal expert to explore your options.
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