My husband died several years ago, and our son is still a minor. After my husband’s death, my father-in-law was killed in a car accident and his estate was opened in Montgomery County, Pennsylvania. My father-in-law’s personal representative brought a lawsuit against the driver. My father-in-law had no Will, was not married and was survived by my husband’s brother and sister. Because he died without a will, a portion of my father-in-law’s estate passes to my son. The wrongful death suit is being settled, and I am being asked as my son’s mother to approve the settlement. That settlement divides the settlement amount 90% as Wrongful Death and 10% as Survival. Does this division matter to my son?
Most likely it does not matter. This is true so long as the settlement is distributed under the Wrongful Death and Survival Action statutes. Here is why.
Wrongful death claims are meant to compensate the deceased’s loved ones for their loss caused by the defendant’s negligent or intentional killing. These proceeds pass outside of the estate and are not subject to inheritance tax in Pennsylvania. Allocating a larger percentage to wrongful death can be sound tax planning. Furthermore, these amounts are always divided under the Pennsylvania Intestacy statute.
Money distributed under the intestacy statute is based on the surviving relatives and descendants of the deceased. Since your father in law had no spouse, his three children would share equally. However, your husband predeceased your father in law. In this case, his share can pass directly to your son if he had a relationship with his grandfather. Remember, wrongful death is meant to compensate the relatives for their loss. From the wrongful death claim he would, if a relationship existed, receive a full 1/3rd share of the 90% under the Pennsylvania Intestacy and wrongful death statutes.
On the other hand, Survival Actions in Montgomery County “compensate” the deceased. The personal representative brings a survival action on behalf of the deceased, as if they had survived to bring the claim themself. This money does pass through the deceased’s estate and is subject to inheritance tax. In your situation, your father-in-law died without a will – or intestate. Therefore, even though the money passes through the estate, it is divided under the Pennsylvania Intestacy statutes.
The proceeds of the survival action would be distributed to him in an equal 1/3rd share of the 10%, for the same reason as above.
It is crucial to get this agreement in writing, signed by all parties including the aunt and uncle. Without a signed agreement, the outcome is less certain, and more susceptible to renegotiation.
Ultimately, he would receive 1/3rd of the total settlement. In this situation, allocation of the settlement agreement would be beneficial to your son by reducing his inheritance tax liability.
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