Understanding Wrongful Death Settlement Payouts
If a person dies unnaturally, whether from medical malpractice or a car accident, their family has a right to seek compensation for damages to recoup financial losses from medical bills, funeral expenses, and lost wages. Surviving loved ones can also ask for money to cover pain and suffering as well as punitive damages if the defendants acted in a malicious or deliberate way that resulted in the death.
When a jury reaches a verdict on a wrongful death case or when all parties successfully agree on a settlement amount, the plaintiffs have to decide how they want to accept the payout. That decision can come with both benefits and disadvantages.
Plaintiffs can ask for the settlement amount to be paid out as a one-time lump sum. This is considered to be the simplest way to receive compensation for damages. The benefit to a lump-sum payout is that people can immediately cover large expenses that may be weighing them down. Because the average wrongful death award amount is at least $500,000, plaintiffs are given a great opportunity to invest that money and see future gains from it. However, those same individuals may feel pressure from family and friends who know about the settlement and ask for money, resulting in a payout that quickly dwindles.
A structured settlement is spread out over a pre-determined number of installment payments. For example, a plaintiff may receive a payment every year for 20 years. Some structured settlements are paid out monthly for decades. The specific payout structure depends on the individual case.
One benefit to receiving recurring payments is that long-term expenses will be covered. Additionally, family and friends may be less likely to ask for money if they know the plaintiff doesn’t have an abundance. The downside to structured settlements is that plaintiffs may take years to pay off the debt incurred as a result of the unexpected death.
Whether a person chooses a lump-sum payout or a structured settlement, the IRS will not tax the money awarded for compensatory damages. Proceeds for punitive damages, however, are taxed.
If you lost a loved one due to the negligent actions of others, contact a wrongful death lawyer for assistance. Navigating the litigation and settlement processes can be challenging without someone on your team.