Do you pay taxes on the money you get from a California wrongful death lawsuit? What about a California personal injury lawsuit such as a car accident settlement?
Yes and no.
When you receive a wrongful death settlement, you are getting a cash payment intended to help compensate you for the loss of your loved one. Many of these payments come from the insurance companies of the responsible parties. For instance, a truck accident wrongful death settlement is often paid for by the truck company’s insurance. California Wrongful death settlements can be a substantial amount of money so of course there are concerns about the tax implications of these funds. Ultimately, the financial awards in these cases are intended to cover many things and for taxation classification purposes, they are divided into compensatory and non-compensatory damages. Here’s a look at what that means
CALIFORNIA COMPENSATORY DAMAGES
Compensatory damages are intended to provide a financial sum that replaces what was lost. Applied to a wrongful death case, that loss is obviously substantial and can include a range of categories. The good news is that when it comes to cash payments intended to compensate for physically illness of injuries (in this case, death), the IRS does not tax these funds. Examples of non-taxable wrongful death compensatory damages include:
- loss of past and future income
- medical expenses
- funeral expenses
- property damage
- Loss of companionship (sexual and otherwise)
CALIFORNIA NON-COMPENSATORY DAMAGES
One important exception to the rule that can result in taxes is when punitive damages award is given in a survival action case. This is where things can certainly get confusing for non-lawyers. When someone dies, there are essentially two cases the family can bring against the offending party: a wrongful death lawsuit (California Code of Civil Procedure 377.60) and a survival action (California Code of Civil Procedure 377.30). One simple way to think about this important difference is this: a survival action is a lawsuit that would be brought had your loved one lived and a wrongful death is one that is brought for the family. When possible (i.e. the deceased lived for even a short period of time) these two actions are combined for your benefit.
In California, the availability of punitive damages rests on a showing of some level of economic loss before the death in a survival action. For instance, a pedestrian is hit by a drunk driver and fatally injured and dies after a couple days in the hospital. In that case, the economic loss before death would be everything from the clothes he or she was wearing and items he or she was carrying at the time of the accident to the hospital bills incurred by the family before the death. The purpose of punitive damages is to punish and deter– punish the defendant for their blatantly bad behavior and disregard and to hopefully deter other bad behavior by them and others by setting an example. So a punitive damage award has to be behavior that isn’t just deadly (i.e. an avoidable car accident) but something that is considered especially bad (i.e. knowingly putting a defective product on the market).
Because the funds from a punitive damage award are above and beyond compensating the family for their loss the way compensatory damages are intended to do, these money award are considered taxable and something you will want to work with a tax specialist on.
Wrongful death and survival actions are confusing which is why working with an experienced attorney is always your best option. If you are dealing with the aftermath of an unjustified killing and want to make sense of your legal options, do not hesitate to get in touch with us today.
Nine Reasons To Choose Us
When looking for a California wrongful death lawyer, you want a law firm that can get you the money you deserve. At Walch Law, we don't just meet our clients' expectations, we exceed them. We win over 95% of our cases and will work hard to get you the same great results we have gotten for so many of our happy clients. When it comes to handing a California wrongful death case, resolving your case as quickly as possible for as much money as possible is how we approach every case.
Founding partner Gary Walch started this law firm to help people in your very situation. With over forty years of experience, you can feel confident that when you hire Walch Law Firm, you are benefiting from his years of experience. Robert Walch has been with the firm since 2000 and has a track record of success, as does the rest of the highly qualified staff at Walch Law. A family firm with the resources of a big law firm means you get the best of both worlds.
There are lots of law firms that will happily take your business but very few will deliver results and handle your case the way that we do. We understand and respect how difficult this time is for you and our family. When you hire Walch Law Firm you are hiring a family firm that you can trust. We have a stellar reputation within the legal community and among our clients.
DON\'T DELETEContingency Fee
For many individuals and families following a death it is not just an emotional time but a stressful financial time as well—hiring an attorney should help relieve this financial stress which is why you hire us on a contingency fee arrangement. Translation: you don't pay for any fees or costs associated with your case until you get paid. We have the financial resources of a large law firm but the accessible environment of a small firm meaning your case won't get lost in the shuffle.
Whenever you are ready, we are available to talk and this open and available communication model is something that our clients enjoy until their case is closed. We keep you informed and updated on your case every step of the way, always explain what's happening in plain English and ultimately deliver on our promise to get you paid.
DON\'T DELETERecent Victories
Winning over 95% of our cases means that you can feel very confident when you hire us to help with your case. Some of our recent victories include a $5,000,000+ settlement for a car accident, $1,250,000 settlement for a wrongful death pedestrian case and $2,500,000 for injuries related to a subway accident.
First and foremost, you are suffering a major traumatic loss and we understand that. We can help with counseling, medical professionals and other important resources during this time. Your focus should be on dealing with this loss, let us take care of all the legal details.
DON\'T DELETEFamily Firm
There are small firms that might not be able to front the costs of your case and there are big law firms that will easily take your case but lack any type of personal touch (and you might have trouble hearing back from them when you want to) and then there's Walch Law Firm. We can handle any case and pride ourselves on our accessibility to clients. Father-son duo Gary & Robert Walch treat everyone like family and this personal touch is something that our clients as well as our employees constantly e!
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