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Are Wrongful Death Settlements Taxable in Pennsylvania?

Posted on September 30, 2022

If you receive a settlement or award from a wrongful death claim, you may wonder whether it is taxable income. For the most part, wrongful death settlements are not taxable in Pennsylvania. However, depending on the specific circumstances of your case, there may be portions of it that is. 

Under Pennsylvania’s wrongful death statute, the personal representative of a deceased person’s estate can pursue damages when the victim’s death is caused by another party’s negligence or intentional actions. The types of recoverable damages in a wrongful death settlement can include, for example: 

  • Funeral and burial expenses;
  • Loss of financial support;
  • Loss of services;
  • Loss of companionship, comfort, assistance, and affection;
  • Loss of sexual relations; 
  • Loss of the deceased’s training and guidance; and,
  • The estate’s administrative costs. 

The estate may also recover punitive damages, which is a type of compensation awarded to punish an at-fault party’s extremely reckless or egregious behavior. Wrongful death proceeds are distributed directly to the beneficiaries, and these types of compensation are not subject to taxes under Pennsylvania law. 

Survival Actions

A survival action is separate from a wrongful death lawsuit, but the two are often combined. The representative of a deceased’s estate pursues this type of claim for the losses the victim suffered before their death. Another way to look at it is compensation the victim could have recovered by filing a personal injury lawsuit had they survived. Therefore, the estate may receive the following types of damages in a wrongful death settlement: 

  • Accident-related medical expenses accrued before death.
  • Lost income up until death.
  • Loss of consortium (loss of love, companionship, assistance, affection, sexual relations, etc.)
  • Conscious pain and suffering and emotional distress the deceased experienced between the accident and their time of death.
  • Attorneys’ fees.

Survival action proceeds are subject to Pennsylvania inheritance tax and federal estate tax and can be used to satisfy any claims by estate creditors. Therefore, the proceeds will be held by the estate’s personal representative, administered through the probate process, and distributed to beneficiaries once all taxes and creditors have been paid. Therefore, it is critical to work with an experienced Philadelphia Wrongful Death Attorney who can work to allocate the majority of a settlement to your wrongful death claim. 

How is a Pennsylvania Wrongful Death Settlement Split? 

Wrongful death settlements in Pennsylvania are specifically intended for the deceased victim’s spouse, children, and/or parents. Compensation will be divided per Pennsylvania’s intestate succession laws, which are as follows: 

  • If there is a surviving spouse and children, the spouse will receive the first $30,000 and half of the remaining amount. The other half of the remaining amount is divided equally between the children.
  • If there is a surviving spouse but no children or parents, the entire award goes to the spouse. 
  • If there are surviving children but no spouse, the entire settlement is divided equally among the children.
  • If there is a surviving spouse and parents but no children, the spouse receives the first $30,000 and half of the remainder, then the other half is divided between the parents. 
  • If there are surviving parents but no spouse or children, the parents split the settlement equally.

If there is no surviving spouse, child, or parent, the personal representative of the deceased’s estate can seek damages, but only for funeral and burial expenses, medical bills, and estate administration expenses.