From our “Ask a Question” Mailbag: Fair Allocation of Wrongful Death and Survival Action Proceeds
Most Recently Updated July 9, 2018.
“I am an administrator of my mother’s Delaware County estate. She died 4 years ago in a car accident without a Will, unmarried and survived by my nephew and myself. My brother died before my mother, and my brother had one son, my nephew. I opened up her estate with the Register of Wills in Delaware County. Later, I hired a lawyer to bring a wrongful death lawsuit against the man who ran into my mother. That lawsuit is about to be settled, and my attorney is asking me to approve that settlement. The funds are to be divided 90% Wrongful Death and 10% Survival Action. Is this fair to my nephew, and as administrator, do I have a duty to pursue a different mix?”
Fair Allocation of Wrongful Death and Survival Action Proceeds
This is an issue you should certainly be concerned about. As the Estate Administrator you have a fiduciary duty, the highest duty under the law, and could be personally liable for any financial miscues. Let’s examine the difference between a wrongful death and survival action to help point you toward the right questions and course of action.
Wrongful Death Claims
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. Finally, the distribution of Wrongful Death proceeds is under a scheme similar to the Pennsylvania intestacy statute.
Intestacy statutes are the government’s response on how to distribute a person’s estate that died without a Will. These statutes typically distribute the estate in equal shares closest relatives of the deceased. In most cases, this ends up being the surviving spouse and children. Here, your mother died a widow; in Pennsylvania, this means her children should share the estate in equal shares.
However, the wrongful death intestacy formula has a caveat. Unlike the regular wrongful death statute, it does matter that your brother predeceased your mother. His share would not automatically pass to his children. Instead, his share would only pass if a judge decides your nephew should be compensated based on his degree of relationship with your mother.
What to Remember
Remember, Wrongful Death is meant to compensate loved ones for their loss which would be impossible for your brother in this scenario. However, his share can pass directly to his son (your nephew) if he had a relationship with his grandmother and deserves to be compensated for his loss. So, before approving any settlement, you should attempt to get in front of a judge to have a determination made on the relationship issue. Otherwise, your nephew could be left out of the 90%, all to your benefit. That may lead to a claim of bias and breach of duty, and personal liability for you.
On the other hand, Survival Actions in Delaware County are meant to “compensate” the deceased. The personal representative brings a survival action on behalf of the deceased as if the deceased had survived to bring the claim themselves. This money does pass through the deceased’s estate and is subject to inheritance tax.
In Your Case…
Again, your mother died without a will so this money passes through her estate, to be divided under the regular Pennsylvania intestacy statutes. Without the caveat as above, your brother’s share passes in full to your nephew, and he would receive an equal ½ of the 10% (or 5% of the total estate).
Family Settlement Agreements
One way to avoid this uncertainty is to enter into a family settlement agreement regarding the distribution of these funds. That way, you can come to terms with your nephew’s guardian based on what is fair to him in this situation and avoid the uncertainty of the intestacy statutes. If this is the path you decide on, it is crucial to get this agreement in writing and signed by all parties.
Ultimately, your nephew could receive ½ of the estate, or 5% based on the outcome of the relationship he had with your mother. It is critical to your duty as administrator to determine the answer to this question before accepting any settlement agreement. You must be careful here!
Further Estate Litigation Questions?
Fair Allocation of Wrongful Death and Survival Action Proceeds are a couple of Estate Litigation issues our firm addresses. Consequently, if you want to learn more, please read my more detailed article, Trust and Estate Litigation All You Need to Know.
In Conclusion: Fair Allocation of Wrongful Death and Survival Action Proceeds
I hope that this article was helpful in explaining Wrongful Death and Survival Action allocation. Further, I included links to even more detailed information on my website. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!
Let our Lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced Litigation Attorneys. By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to put our 25 years of estate litigation experience to work for you.
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