How Are Wrongful Death Settlements Paid Out?


November 18, 2022 / Wrongful Death

Dealing with the death of a loved one caused by someone else’s negligence can be devastating. You may receive some benefits through your loved one’s life insurance, but that might not alleviate the financial and emotional burden that you feel. You may be able to pursue a wrongful death lawsuit for additional compensation.

Wrongful death lawsuits can be complicated and stressful, so it is important to consult with an experienced attorney who can represent your best interests.

If you’ve decided to pursue a wrongful death lawsuit for additional compensation, you might be wondering how the money gets paid out.

How to Obtain Settlement

Before we discuss the ins and outs of the money, here’s a little background of how you get to the point of a settlement. You must have sued another party for the wrongful death of your loved one. Your lawsuit will either be decided by a trial in front of a judge or jury, or you may settle without going to trial. The judge or jury will decide how much the family members are entitled to, or you will negotiate with the responsible parties to come up with an agreeable amount of compensation.

Who Pays the Compensation?

If the wrongful death lawsuit is successful, the person or entity that caused the death (or their insurance company) pays the survivors of the person who died. Individuals, companies, organizations, and even government entities can be held liable and made to pay.

A wrongful death settlement is usually paid out by the other party’s insurance company. Whether the insurance company pays depends on whether wrongful death or liability is covered by the at-fault party’s policy. However, the existence of insurance coverage doesn’t necessarily mean the insurance will pay the settlement amount.

Most insurance policies have a policy limit that provides for a maximum payout amount. If the settlement is higher than the coverage limit, the other party will be personally responsible for the rest of the amount out of pocket.

If there is no insurance coverage, the other party is responsible for the entire settlement amount.

The at-fault person may have wages that can be garnished or assets that can be taken or sold. Sometimes, the person who caused a wrongful death simply doesn’t have the money to pay, making it hard to collect. For this reason, it’s important to identify all parties who may have potentially contributed to the death. If there is more than one entity or person on the hook, there is a better chance of getting a full award.

How Much Compensation is Available?

Calculating the damages in a wrongful death lawsuit can be extremely complicated.

The damages available might include:

  • Funeral or burial expenses
  • Medical expenses for treatment of injuries before the person died
  • Pain and suffering of the person who died
  • Loss of support, love, guidance, and companionship for the survivors
  • Loss of earnings or lost wages if the deceased person was a provider
  • Loss of future inheritance
  • Attorney fees.

What damages you request will depend on your specific losses. For example, the victim’s debts will need to be considered and paid out of the estate. The calculation can involve financial and economic experts to monetize the full impact of the loss.

Some things to consider when determining what compensation is available includes the person’s . . .

  • Age
  • Education, training, and occupation
  • Earning capacity
  • State of health
  • Income at the time of death,
  • Life expectancy
  • Dependents and their ages and circumstances.

The specific amount of damages claimed must be supported by evidence. A lawyer can help value your claim.

Lump Sum vs. Structured Settlement

If you settle the case, the terms will provide you with a structured settlement or a lump sum payment. Each has advantages.

Structured Settlement

In a structured settlement, the losing party pays damages in installments over time, usually on a regular schedule. It may be months or years, depending on any agreement reached or what is ordered by a court. The intermittent payments continue until the settlement has been paid in full. Once it is established, a structured settlement can be hard to change. You should work with an attorney before you accept any settlement to make sure you understand all the implications.

One advantage to a structured settlement is that it can help financially over the long term. By receiving an amount every year, for instance, some families feel they can anticipate and manage finances more easily, because the settlement can act as a replacement for lost regular wages. However, some might find it difficult to pay large bills and other debts when getting a little money at a time. Moreover, additional financial planning is needed for when the regular settlement payments end.

Lump Sum

A responsible party or their insurer may agree to pay the entire settlement at once in a lump sum. If that happens, the beneficiaries receive a single payment of the full amount.

One advantage to a lump sum payment is that it would provide for immediate payment of bills, such as a funeral bill or medical expenses. Another advantage is that you can pass funds of an upfront payment on to your heirs. However, the tax implications of a large lump sum might discourage someone from choosing this option.

Which is Better–A Lump Sum or a Structured Settlement?

For some people, a lump sum would be better. An older person in poor health, for instance, might have a greater benefit from a lump sum payment.

For others, a structured settlement better fits their needs. For example, those without financial advisors and planning may find it difficult to make a lump sum provide for long-term needs.

Tax Considerations

It is important to understand that portions of the settlement may be taxed by the IRS. This is true regardless of whether you receive a lump sum or a structured settlement. Taxes can dramatically reduce the financial benefit you pocket from the wrongful death settlement.

Compensation for pain and suffering is generally not taxable, but punitive damages that are meant to punish the at-fault party are usually taxable.

Any award should clearly set forth which and whether any damages are compensatory or punitive. This will help with IRS reporting. It is important to talk to your lawyer or an experienced accountant when determining tax repercussions of any settlement proposal before acceptance.

How Funds Are Distributed

There can be many parties interested in the settlement of a wrongful death case. For example, a surviving spouse, surviving children, other family members, and creditors may all try to claim a portion of the compensation. Sometimes, the settlement will not satisfy everyone’s demands. If eligible survivors don’t file, the estate may seek damages.

How the money is split among the survivors depends on different factors. In general, settlements must be apportioned fairly and reasonably. That usually means that the surviving spouse will receive the largest share, followed by children getting the next largest share. The remaining amount will be divided between other beneficiaries who can show they have suffered losses due to the victim’s death. The court has the ability to approve or disapprove of any distribution.

However, when the case settles outside of trial, if the beneficiaries agree, they can determine among themselves exactly how the money will be divided. If the case goes to trial, the judge or jury will decide how to split the money.

Ask Our Experienced Lawyers for Help

If you need advice regarding how much your wrongful death case is worth, and whether you should accept a lump-sum payment or structured settlement, Stephenson Rife can help. An experienced attorney regularly calculates the damages that the injured party is entitled to and can assist in determining whether to take a settlement offer.

Contact Stephenson Rife as soon as possible at (317) 680-2350.

Your attorney can guide you regarding when to accept and when to counter. With this guidance, you can avoid leaving money on the table.

Attorney Mike Stephenson

Attorney Mike StephensonMike Stephenson has 40 years of experience and is a trusted advisor to many individuals and companies. His current practice is dominated by civil litigation in state and federal courts. He focuses much of his time on handling catastrophic injuries caused by all types of accidents, including motor vehicle, trucking, workplace injuries, product liability, and fire, just to name a few. He also works extensively in construction accidents. [ Attorney Bio ]

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