Once a family wins a wrongful death lawsuit in Indiana, who gets the money? That’s a complicated process at the intersection of probate law and personal injury law. It’s not the family that gets the money, at least, not immediately.
Instead, the money from a wrongful death lawsuit goes to the estate of the deceased individual, which may be managed by a family member or an outside party. Here’s how that money gets distributed from there.
How the Probate Process Works
The process of handling someone’s assets and debts after death is known as probate. The court, or the will if the deceased had one, will name an executor who is responsible for the estate.
You likely already know who that is because Indiana doesn’t allow wrongful death claims to be submitted by anyone other than the executor. After the wrongful death attorney takes their fee, the rest goes into the estate and is processed according to probate law.
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After Receiving a Wrongful Death Settlement in Indiana, Debts Are Paid First
First, certain debts from the estate must be paid from the wrongful death settlement. Namely, medical and burial damages. All of these costs incurred because of the wrongful death must be paid off first.
If your loved one had other debts, we recommend speaking with your probate lawyer about whether additional money from the settlement must go to those debts before the family or as instructed by the will.
Yes, this means that there may be nothing left to the family from the award after the debts are paid. However, this may free up other assets of the deceased to be distributed. It all goes into the same pot, more or less.
How Funds Are Distributed to the Family in a Wrongful Death Case
Indiana Code Title 34 has the details on how funds are distributed from a wrongful death lawsuit. Any remaining money from the wrongful death lawsuit after paying back the debts first goes to the surviving spouse, dependent children, and dependent next-of-kin.
If there is no one in the deceased’s family that matches those categories, then the process gets far more complicated. We encourage the estate representative to speak with a probate attorney about the next steps if this is the case. You may still be able to get financial compensation for administering the estate.
Once the money is distributed out, there is no limitation about what the recipient can do with it. They can split it between other family members or keep it for themselves. Ideally, the family should agree on what to do far in advance to avoid making the situation more complicated and tragic.
How Do Taxes on a Wrongful Death Lawsuit in Indiana Work?
If there are no punitive damages awarded in your case, then the estate will likely not have to pay taxes on the compensatory damages. However, if you took deductions related to medical bills surrounding the accident, you may need to pay taxes on those deductions.
If there are punitive damages, those are taxable damages and will need to be paid out from the estate in the final tax return. Your probate lawyer or a CPA with experience in estate tax planning can tell you how much you’ll need to reserve in this situation. Your Indiana wrongful death lawyer may also have some recommendations.