October 3, 2009
Inheritance tax on accident settlement?
Spunksters asked:
My father passed away alittle over a year ago. He was in a car accident and suffered a brain injury which eventually took his life. The lawsuit has been finally settled and my lawyer tells me that this money must go to probate and an inheritance tax paid. Is this true? Is there anyway of getting around this? Any help would be appreciated. My lawyer wants to charge an extra 3k for him to do the paperwork, I said, “no way”, I will do it myself.
My father passed away alittle over a year ago. He was in a car accident and suffered a brain injury which eventually took his life. The lawsuit has been finally settled and my lawyer tells me that this money must go to probate and an inheritance tax paid. Is this true? Is there anyway of getting around this? Any help would be appreciated. My lawyer wants to charge an extra 3k for him to do the paperwork, I said, “no way”, I will do it myself.
Thank-you!
Filed under United States by admin
Comments on Inheritance tax on accident settlement? »
It makes sense that the insurance settlement becomes part of your father’s estate.
Whether there is estate tax depends on the size of the estate. But unless you really know what you are doing, doing the probate and estate paperwork yourself could be risky.
If your father’s estate is large enough that estate taxes need to be paid (>$2 million), then I would cough up the $3K to let the lawyer take care of it. But yes, the settlement would be part of the estate and treated no differently than the rest of his assets.
I know life insurance is not taxable but i am not sure if a settlement is. I am assuming the law suit was started by his attorney while he was still alive? Contact your local tax office and ask them or call the IRS.
The answer to your question partly depends on the state you live in. There is no federal inheritance tax so that will not be an issue. However it appears from the information you have supplied that the insurance award was to your father and will become a part of his estate. If you have an attorney that will handle an estate for 3K it must be a really simple estate with very little in assets or he works really cheap. If you are asking questions in this forum I would venture that you do not have the knowledge to properly complete an estate filing. Pay the attorney.