Q: What kind of taxes would we need to pay on any settlement we'd get?
A: Ordinarily, lump sum amounts recovered for compensatory damages awarded in wrongful death claims are not taxable. If the recovery is not related to compensation for personal injuries, but for economic losses like lost wages, and the dollar amount is separately stated in the recovery, then those amounts remain subject to tax. However, in most cases, the recovery is a single lump sum covering pain and suffering and other types of damages, economic as well as non-economic, so the amount is treated as non-taxable in its entirety. The new tax law has changed the tax treatment for recovery of purely emotional damages not tied to a physical injury (such as purely emotional distress claims and compensation for violation of civil rights, like discrimination and hostile work environments). Consult a tax professional for these latter types of claims, as they may be taxable as income--but only in cases where those were the only types of damages awarded.
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