Wrongful Death cases are generally brought by family members surviving the decedent who died
as the result of a personal injury. Generally, there are two components. One is the Wrongful
Death action itself. This is designed to compensate surviving family members for their loss of
consortium. In addition, there is usually a Survival Claim brought by the personal representative
of the decedent’s estate. This money is paid to the beneficiaries of the estate. If there is a Will
the Will controls, in the absence of a Will the state’s intestacy statute controls.
Issue #1 – Apportionment Between Wrongful Death Claim and Survival Claim
The apportionment between the Wrongful Death claim and the Survival Claim is important,
because the payments made to the Wrongful Death claim plaintiffs are income tax-free as a
personal injury settlement. The Survival Claim is income tax-free, but is subject to estate and
inheritance taxes. For 2013, the exemption from federal estate tax is $5,250,000. The New
Jersey estate tax exemption is only $675,000 for persons inheriting that are not the spouse. In
Pennsylvania, there is an inheritance tax beginning at 4.5%. In Pennsylvania, the Department of
Revenue must approve any such allocation between Wrongful Death and the Survival claim.
Issue #2 – Allocation Among Wrongful Death Plaintiffs
If the Wrongful Death plaintiffs were dependent on the decedent, they take in a manner that
results in a fair and equitable apportionment. Factors to be considered are the age of the
dependents, their physical and mental condition, the necessity or desirability of providing them
with educational facilities, their financial condition and the availability to them of other means
of support, present and future, and any other relevant factors that would contribute to a fair and equitable apportionment of the amount recovered.
Issue #3 – Minors and Incapacitated Persons
If the plaintiffs are minors or incapacitated persons, a Friendly Hearing must be held in New
Jersey or a petition for approval of a compromise must be filed in Pennsylvania. In these
proceedings the plaintiffs must justify to the court the intended allocation to or for the benefit of
the minor or incapacitated persons.
In these situations a trust should be considered. If the minor or incapacitated plaintiff is
disabled as determined by the Social Security Administration (SSA), then a Special Needs
Trust should be considered. If there is no Determination of Disability by SSA, a Settlement
Preservation Trust should be considered. It is always helpful to avoid having funds placed into
a surrogate’s account or the court for a minor or incapacitated person. In fact, in Pennsylvania
any settlement in excess of $25,000 must be placed in a restricted account or in the hands of a
corporate fiduciary. Under these arrangements a minor is able to access the funds at age 18 and
withdraw the monies for any purpose. In New Jersey, courts typically will approve Settlement
Preservation Trusts that protect the minor beyond age 18. In Pennsylvania, some counties will
approve delayed withdrawal rights and others will not. Prior to the minor attaining age 18, it is
easier and less expensive to utilize a trust rather than request or petition the court or surrogate’s office for withdrawals. Trust investment results are almost always better than those obtained by the surrogate’s office or a court.