When a wrongful death lawsuit settles or results in a verdict, the money doesn't simply go to one person. State law governs how wrongful death proceeds are divided among surviving family members, and the distribution process can become complicated when multiple beneficiaries have competing interests.
Understanding how distributions work helps families anticipate what they'll receive, avoid conflicts, and make informed decisions about settlements.
Who Receives Wrongful Death Proceeds
State wrongful death statutes specify who qualifies to receive settlement or verdict proceeds. Common beneficiaries include:
- Surviving spouse – Typically the primary beneficiary
- Children – Both minor and adult children
- Parents – Especially when no spouse or children exist
- Dependents – In some states, anyone financially dependent on the deceased
The entitled beneficiaries vary by state and may not match what the deceased wanted or what seems fair. Wrongful death distributions follow statutory rules, not the deceased's will.
Distribution Methods
States use different approaches to divide wrongful death proceeds:
Statutory Formulas
Many states prescribe specific formulas for distribution. Common approaches include:
- Equal division – All beneficiaries in a class receive equal shares
- Intestacy rules – Distribution follows the same rules as if the deceased died without a will
- Priority systems – Higher-priority beneficiaries receive all proceeds before lower-priority beneficiaries receive anything
For example, a state might direct that a surviving spouse receives the first $100,000 plus half the remainder, with children splitting the rest equally.
Court Discretion
Other states give courts discretion to distribute proceeds based on each beneficiary's relationship to the deceased and the losses they suffered. Factors courts consider include:
- Financial dependency on the deceased
- Closeness of the relationship
- Each beneficiary's age and circumstances
- Individual losses suffered
By Damage Category
Some states allocate proceeds based on which beneficiaries suffered which damages:
- Lost financial support goes to those who received support
- Loss of consortium goes to the surviving spouse
- Loss of parental guidance goes to children
Distribution When Proceeds Flow Through Estate
In states requiring the personal representative to file the lawsuit, proceeds typically flow through the estate:
- Settlement or verdict is paid to the estate
- The personal representative distributes to statutory beneficiaries
- Distribution follows state law, not the deceased's will
Wrongful death proceeds are not estate assets in the traditional sense—they don't go through regular probate distribution and aren't available to pay the deceased's creditors in most states.
Survival Action Proceeds
Survival action proceeds—compensation for the deceased's own damages between injury and death—are treated differently from wrongful death proceeds:
- Survival proceeds are estate assets
- They pass according to the deceased's will or intestacy laws
- They may be available to pay estate debts and creditors
- Distribution may differ from wrongful death proceeds
Because wrongful death and survival actions often settle together for a single amount, allocating the settlement between the two claims becomes important and may affect tax treatment and distribution.
Distribution to Minor Children
When minor children are beneficiaries, special rules protect their interests:
Court Approval
Settlements involving minor beneficiaries typically require court approval. Judges review the settlement to ensure it fairly compensates the children and that the distribution protects their interests.
Structured Settlements
Courts often require minor children's shares to be placed in:
- Structured settlements – Periodic payments over time rather than lump sums
- Blocked accounts – Bank accounts the child cannot access until adulthood
- Court-supervised trusts – Managed funds with court oversight
- Guardianship accounts – Accounts requiring court permission for withdrawals
Guardian Ad Litem
Courts often appoint a guardian ad litem—an independent representative—to evaluate whether settlements and distributions serve children's best interests.
Disputes Among Beneficiaries
Distribution disputes arise when beneficiaries disagree about fair allocation. Common conflicts include:
Spouse vs. Children
Surviving spouses and children (especially from prior marriages) may disagree about distribution. A spouse may feel entitled to more as the primary partner; adult children may feel they deserve larger shares.
Children with Different Circumstances
Should a wealthy adult child receive the same share as a minor child who depended entirely on the deceased? Courts in discretionary states may adjust distributions; formula states may not.
Estranged Family Members
Family members who had no relationship with the deceased may still qualify as statutory beneficiaries. Those who were close may resent distribution to estranged relatives.
Resolution Methods
Distribution disputes can be resolved through:
- Negotiation among beneficiaries
- Mediation with a neutral third party
- Court determination when parties cannot agree
Distribution disputes can delay case resolution and consume settlement proceeds in legal fees. Families often benefit from addressing potential conflicts early.
Allocating Settlement Between Claims
When wrongful death and survival claims settle together, the allocation between claims matters for:
- Tax treatment – Survival action proceeds may have different tax implications
- Distribution – The two claims may have different beneficiaries
- Creditor claims – Survival proceeds may be available to estate creditors
Settlement agreements should clearly specify how proceeds are allocated between wrongful death and survival components.
Deductions Before Distribution
Before beneficiaries receive their shares, certain amounts are typically deducted:
Attorney Fees
Wrongful death attorneys typically work on contingency, taking a percentage of the recovery (usually 33-40%). This fee comes off the top before distribution to beneficiaries.
Litigation Costs
Case costs—filing fees, expert witnesses, depositions, medical records—are also deducted, either from the total recovery or from the attorney's fee, depending on the fee agreement.
Medical Liens
Healthcare providers or health insurers who paid for the deceased's treatment may have liens against the recovery that must be satisfied.
Estate Expenses
When proceeds flow through the estate, estate administration costs may be deducted.
Tax Implications of Distribution
Wrongful death settlements are generally not taxable income to beneficiaries under federal tax law, as they compensate for physical injuries. However, exceptions exist:
- Punitive damages are taxable
- Interest on delayed payments is taxable
- Some survival action components may be taxable
State tax treatment varies. Beneficiaries should consult tax professionals about their specific situations.
Timing of Distribution
Distribution timing depends on several factors:
- Settlement payment – Defendants may pay immediately or over time
- Court approval – Required for minor beneficiaries and in some states for all distributions
- Lien resolution – Medical liens must be satisfied or disputed
- Beneficiary agreement – Disputes delay distribution
Simple distributions might occur within weeks of settlement; complex situations can take months.
Family Agreements
Beneficiaries can sometimes agree to distributions different from statutory defaults:
- One beneficiary might assign their share to another
- Family members might agree to support minor children with combined proceeds
- Beneficiaries might create a family trust rather than individual distributions
Such agreements must be voluntary and, when minors are involved, require court approval.
Conclusion
Wrongful death distribution follows state-specific rules that may not match families' expectations. Understanding how distribution works before settlement helps families make informed decisions and anticipate potential conflicts.
If you're involved in a wrongful death case with multiple beneficiaries, discuss distribution early with your attorney. Addressing potential issues proactively is far easier than resolving disputes after settlement.