Savannah, GA asked in Tax Law and Wrongful Death for Georgia

Q: Do I have to pay taxes on funds received from my mother's personal injury cases case. She died as a result.

The defendant payed a settlement to my mother's estate. The settlement states "No Releasee has ever admitted, and but rather each specifically denies, any allegation of wrongdoing. " The case was against a nursing home.

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2 Lawyer Answers
Eric  Day
Eric Day
  • Tax Law Lawyer
  • Henderson, NV

A: If the settlement is for pain and suffering, then the payment of that settlement is non-taxable. The only issue you would have as far as taxability of the funds that were then distributed to you through the estate would be if the distribution exceeded the exemption amount on the gift tax of 11.5 million dollars. In other words, if your inheritance from your mother's estate (including the distribution of the personal injury suit) was less than $11.5 million, then you would not have to pay tax, but there should be an estate tax return somewhere.

Michael W. Horst
Michael W. Horst
  • Alpharetta, GA
  • Licensed in Georgia

A: No matter the language of the release, personal injury settlements themselves are not subject to income tax under either federal or state law. There is a seldom used exception for awards or settlements which are for punitive damages exclusively but it does not sound like that applies in your case.

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