Is a Wrongful Death Settlement Taxable in Massachusetts?

For the most part, no: money a family receives in a Massachusetts wrongful death settlement for the loss of the person who died is not taxable income, on the federal return or the Massachusetts return, because it is received on account of a physical injury, and 26 U.S.C. sec. 104(a)(2) excludes those damages from gross income. Three things change that answer. Punitive damages, which M.G.L. c. 229, sec. 2 allows when the death was caused by reckless conduct or gross negligence, are taxable. Interest on a judgment is taxable. And the separate award for the person’s conscious suffering before death is, under c. 229, sec. 6, an asset of the estate, which matters for creditors and, for a large estate, for estate tax. The rest of this page takes each piece in turn, with a table that sorts them, and the steps a family can take so the paperwork matches the law.

If your family is working through a wrongful death claim and wants to talk it through, call Jim Glaser Law at (617) JIM-WINS. The line is answered 24 hours a day, and the first telephone consultation is free. This page is general information, not legal or tax advice, and the tax return itself belongs with a tax preparer who has the settlement papers in hand.

One Recovery, Several Different Kinds of Money

A Massachusetts wrongful death case usually produces one check, but the law sees several different kinds of money inside it, and each is treated differently for tax. Understanding the pieces is the whole answer.

Section 2 of chapter 229 lists what the person responsible for a death is liable for:

1. The fair monetary value of the decedent to the family members entitled to the recovery. The statute spells out what that includes: the loss of the person’s “reasonably expected net income, services, protection, care, assistance, society, companionship, comfort, guidance, counsel, and advice.”
2. Reasonable funeral and burial expenses.
3. Punitive damages of “not less than five thousand dollars” where the death was caused by “malicious, willful, wanton or reckless conduct” or by “gross negligence.”

Section 6 of the same chapter adds a fourth piece: damages “for conscious suffering resulting from the same injury,” which covers what the person went through between the injury and death. A crash victim who survived for hours or days in a hospital had their own claim for that suffering, and the law lets the executor recover it in the same case.

Finally, if a case goes to verdict rather than settling, interest is often added to the judgment, and that is a fifth kind of money.

Here is how each one is usually treated:

Piece of the recovery	Where it goes under chapter 229	Federal and Massachusetts income tax	Estate side
Fair monetary value (lost support, services, companionship)	To the family members named in sec. 1	Not taxable when received on account of the physical injury that caused the death, 26 U.S.C. sec. 104(a)(2)	Goes to the family under the statute, not through the estate (subject to the sec. 6A charges if the estate is short)
Funeral and burial expenses	Reimburses whoever paid them	Not taxable, same exclusion	Same as above
Punitive damages (sec. 2 clause (3))	To the family members named in sec. 1	Taxable; sec. 104(a)(2) excludes damages “other than punitive damages”	Same as above
Conscious suffering (sec. 6)	Held by the executor “as assets of the estate”	Not taxable as income, same exclusion	Counted in the estate; reachable by estate creditors
Interest on a judgment	Follows the award it is added to	Taxable as interest	Follows the award

The table is a map, not a ruling on any particular settlement. A tax preparer will look at how the settlement agreement describes each payment, so the wording of the papers matters as much as the law.

Why the Main Award Is Not Income

The federal exclusion is short. Section 104(a)(2) of the Internal Revenue Code says gross income does not include “the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness.”

A wrongful death claim exists because a physical injury caused a death. The compensatory money paid to the family, whether it measures lost income, lost companionship or funeral costs, is paid on account of that physical injury, so it sits inside the exclusion. It does not matter that the family members receiving it were not the ones physically hurt, and it does not matter whether the money arrives as a jury award or as a negotiated settlement, because the statute covers both “suit or agreement.”

Massachusetts follows the federal treatment automatically. Chapter 62, sec. 2 defines Massachusetts gross income by reference to federal gross income, so an amount excluded federally under sec. 104(a)(2) is not part of Massachusetts gross income either. The general rule, with its other exceptions, is set out in is a personal injury settlement taxable in Massachusetts.

One feature of the wrongful death award surprises families: “lost income” is in the statute’s list, and lost wages are normally taxable. Here they are not, because the award is not wages. It is damages measured partly by income the person would have earned, paid because of a physical injury, and the exclusion follows the reason for the payment, not the yardstick used to size it.

Punitive Damages: The Part That Is Taxed

Massachusetts writes punitive damages into the wrongful death statute itself. Where the death was caused by the defendant’s “malicious, willful, wanton or reckless conduct” or “gross negligence,” sec. 2 clause (3) allows punitive damages of not less than $5,000. A death caused by a drunk driver, a driver fleeing police, or a company that knowingly ignored a safety hazard are the kinds of cases where this clause is pleaded.

Punitive damages are taxable. The parenthetical in sec. 104(a)(2), “other than punitive damages,” removes them from the exclusion by name, and they reach the Massachusetts return through the same c. 62, sec. 2 link.

There is a federal exception aimed specifically at wrongful death cases, and it is worth knowing about mainly so a family can rule it out. Section 104(c) keeps the exclusion for punitive damages in a wrongful death action, but only where the state law in effect on September 13, 1995 provided “that only punitive damages may be awarded in such an action.” That describes a state whose wrongful death statute allowed punitive damages and nothing else. Massachusetts law allows the full compensatory measure in sec. 2 clause (1), so a Massachusetts case is not the case sec. 104(c) was written for, and the punitive portion is taxed.

Two practical points follow:

• Punitive damages are taxed to whoever receives them. Under sec. 2 the damages go to the persons entitled under sec. 1, so a surviving spouse who receives a share of a punitive award reports that share.
• In a settlement, punitive damages are rarely labelled at all. Most settlements resolve every claim for one sum without assigning any of it to punishment. When a release allocates nothing to punitive damages, the family is not inventing a taxable slice; the question becomes how the payment was actually described and why it was paid. That is a conversation for the tax preparer with the papers.

Who Receives the Money, and Why It Matters for Tax

The tax answer depends on which pocket the money lands in, and chapter 229 decides that.

The sec. 2 award goes to the family under sec. 1. The executor or administrator brings the case, but sec. 2 says the damages are for “the persons entitled to receive the damages recovered, as provided in section one.” Section 1 sets the shares:

1. A spouse and no children or issue: all to the spouse.
2. A spouse and one child (or the issue of one deceased child): one half to the spouse and one half to the child or that child’s issue.
3. A spouse and more than one child: one third to the spouse and two thirds to the children or their issue.
4. No spouse: to the next of kin.

Because this money passes to the family by statute, it does not become part of the person’s estate in the ordinary sense. There is one exception, in sec. 6A: if the estate’s own assets are not enough, sums recovered under sec. 2 are subject to the estate’s administration charges and funeral expenses, to “all medical and hospital expenses necessitated by the injury which caused the death,” and to reasonable attorneys’ fees and costs of the suit.

The conscious suffering award goes to the estate. Section 6 says any sum recovered for conscious suffering “shall be held and disposed of by the executors or administrators as assets of the estate of the deceased.” So it passes under the will, or by intestacy if there is no will, and it is available to the estate’s creditors. Section 6B adds that if it arrives more than a year after the death, it is treated as “new assets” of the estate.

That is why the split between the two awards matters. A settlement that resolves both claims for one sum leaves the executor to account for how much is a family recovery and how much is an estate asset.

Estate Tax Is a Different Question

Income tax asks whether a person has to report money they received. Estate tax asks whether the estate of the person who died is large enough to owe tax on what passes at death. A wrongful death case can raise the second question even when it raises no income tax at all.

The federal estate tax reaches property “to the extent of the interest therein of the decedent at the time of his death,” in the words of 26 U.S.C. sec. 2033. The two chapter 229 awards line up on opposite sides of that sentence:

• The conscious suffering award under sec. 6 was the person’s own claim and is an asset of the estate by statute. It is counted when the estate is valued.
• The sec. 2 award compensates the family for their loss and goes to them under sec. 1. It was never a claim the person held while alive. Whether it is counted is a question for the estate’s accountant, who will look at the statute and the papers.

For most families the estate tax never arrives. The federal basic exclusion amount is $15,000,000 for 2026 under 26 U.S.C. sec. 2010(c)(3), adjusted for inflation after that. Massachusetts is the one to watch, because its threshold is far lower: under c. 65C, sec. 2A(g), the estate of a person who died on or after January 1, 2023 owes no Massachusetts estate tax only if the federal taxable estate is not more than $2,000,000. A house in eastern Massachusetts, a retirement account and a life insurance policy can approach that figure before any recovery is added. If the estate is near the line, the executor and the accountant need to know about the conscious suffering award before the estate tax return is prepared.

Massachusetts has no separate inheritance tax on the family members who receive a share; the estate tax is a tax on the estate.

Answer Capsule

A Massachusetts wrongful death settlement is mostly not taxable income. Compensatory damages under M.G.L. c. 229, sec. 2 for the fair monetary value of the person who died, including lost support and companionship, and for funeral and burial costs, are excluded from federal income under 26 U.S.C. sec. 104(a)(2), and Massachusetts follows through c. 62, sec. 2. Punitive damages, which sec. 2 allows at not less than $5,000 for reckless conduct or gross negligence, are taxable, and the sec. 104(c) exception does not apply in Massachusetts. Interest on a judgment is taxable. The separate award for conscious suffering under sec. 6 is an asset of the estate, so it is counted for Massachusetts estate tax, which applies when the federal taxable estate is over $2,000,000. This is general information, not tax advice.

Interest, Medical Bills and Other Edge Cases

Interest. When a wrongful death case goes to verdict, interest is often added to the judgment for the time the case was pending. Interest is income, not damages for a physical injury, and it is taxable to whoever receives it, even when the award it is attached to is not. In a case that took several years to reach judgment, the interest can be a large number, which is one reason a family should know, before the money is divided, what portion of a judgment is interest.

Medical expenses that were already deducted. Section 104(a) opens with an exception for amounts attributable to medical expense deductions allowed “for any prior taxable year.” If the person’s hospital bills were deducted on an earlier income tax return and the settlement then reimburses them, the reimbursed amount can be taxable to the extent of the earlier tax benefit. This only arises when a deduction was actually taken, which is uncommon, but it is the kind of detail a preparer will ask about.

Emotional distress. In an ordinary injury case, damages for emotional distress with no physical injury behind them are taxable. In a wrongful death case, the family’s grief and loss of companionship are part of the sec. 2 award for the fair monetary value of a person whose death was caused by physical injury, so they fall inside the exclusion along with the rest of that award.

Legal fees. Fees and costs come out of the recovery. On the excluded portion that changes nothing for tax. On a taxable portion, such as a punitive award or interest, the fee can affect what is reported, which is covered in the general settlement tax article. If you are thinking about hiring a lawyer for a death case, ask about the fee arrangement directly: many handle these cases on a contingency fee, meaning no attorney fee unless there is a recovery, though the client may still be responsible for costs and expenses depending on the written agreement.

Workers’ compensation death benefits. When the death happened at work, the dependency benefits paid under chapter 152 are a separate stream with their own exclusion in sec. 104(a)(1), and sec. 2 of chapter 229 says the liability of an employer to an employee is not governed by the wrongful death statute. A claim against someone other than the employer can still proceed. The comp side is covered in is workers’ comp taxable in Massachusetts.

Steps That Keep the Tax Treatment Clean

The law above is fixed. What a family controls is the paperwork, and clean paperwork is what lets a preparer apply the law without guessing.

1. Get the executor or administrator appointed first. Under sec. 2 only the executor or administrator can bring the claim, and only the executor can hold the sec. 6 conscious suffering award. Appointment is through the Probate and Family Court, and the probate timeline is covered in how long probate takes in Massachusetts.
2. Ask how the settlement allocates the money. A release that resolves both the sec. 2 wrongful death claim and the sec. 6 conscious suffering claim for one sum should say how much is attributed to each, because one goes to the family and the other is an estate asset.
3. Read the release for any word about punitive damages or interest. If the agreement labels part of the payment as punitive or as interest, that part is taxable, and the family should know before the money is divided.
4. Keep the medical and funeral records. Funeral and burial expenses are their own item in sec. 2, and medical and hospital expenses of the fatal injury are among the sec. 6A charges, so the receipts help show what each dollar paid for.
5. Tell the estate’s accountant about the case early. If the estate is anywhere near the $2,000,000 Massachusetts threshold, the conscious suffering award can change whether an estate tax return is owed.
6. Bring the settlement papers to a tax preparer in the year the money arrives. The preparer needs the release, the distribution under sec. 1, and any Form 1099 that was issued, not a summary of them.

Key terms

• Wrongful death award: the damages under M.G.L. c. 229, sec. 2 for the fair monetary value of the person who died, funeral and burial expenses and, in some cases, punitive damages, recovered by the executor for the family.
• Persons entitled: the family members named in c. 229, sec. 1 who receive the sec. 2 award in fixed shares: the spouse, the children or their issue, or, with no spouse, the next of kin.
• Conscious suffering award: damages under c. 229, sec. 6 for what the person went through between the injury and death, held by the executor as an asset of the estate.
• Punitive damages: an award of not less than $5,000 under sec. 2 clause (3) for a death caused by malicious, willful, wanton or reckless conduct or gross negligence, and the one part of the award that sec. 104(a)(2) taxes.
• Gross estate: for federal estate tax, the property in which the person had an interest at death, under 26 U.S.C. sec. 2033; Massachusetts builds its own estate tax on that federal measure.
• Executor or administrator: the person the Probate and Family Court appoints to manage the estate; the executor is named in a will, and an administrator is appointed when there is no will or no executor willing to serve.

Frequently Asked Questions

Q: Do I have to pay income tax on a wrongful death settlement in Massachusetts?

A: Usually not on the main award. Compensatory damages under M.G.L. c. 229, sec. 2 for the loss of the person who died, including lost support, companionship and funeral costs, are excluded from federal gross income by 26 U.S.C. sec. 104(a)(2) because they are paid on account of a physical injury, and Massachusetts follows the federal definition through c. 62, sec. 2. Punitive damages and interest are the exceptions and are taxable.

Q: Are punitive damages in a Massachusetts wrongful death case taxable?

A: Yes. Section 104(a)(2) excludes damages “other than punitive damages,” and the narrow sec. 104(c) exception applies only where state law as of September 13, 1995 allowed nothing but punitive damages in a wrongful death action. Massachusetts allows full compensatory damages under sec. 2, so the exception does not apply, and a family member who receives part of a punitive award reports that part as income.

Q: Is the lost income part of a wrongful death award taxed like wages?

A: No. Section 2 measures the family’s loss partly by the person’s reasonably expected net income, but the award is damages paid because a physical injury caused a death, not wages. The exclusion in sec. 104(a)(2) follows the reason for the payment, so the lost income measure is excluded along with the rest of the compensatory award.

Q: Who receives the money from a Massachusetts wrongful death settlement?

A: The sec. 2 award goes to the persons entitled under c. 229, sec. 1: all to a spouse with no children; half and half between a spouse and one child; one third to a spouse and two thirds to the children when there is more than one child; and to the next of kin when there is no spouse. The separate conscious suffering award under sec. 6 goes to the estate instead.

Q: Does a wrongful death settlement count toward the Massachusetts estate tax?

A: The conscious suffering award under c. 229, sec. 6 is held “as assets of the estate,” so it is counted when the estate is valued. The sec. 2 award goes to the family under sec. 1 and was never the person’s own claim; how it is treated is a question for the estate’s accountant. Massachusetts estate tax applies only when the federal taxable estate is over $2,000,000, under c. 65C, sec. 2A(g), for deaths on or after January 1, 2023.

Q: Can creditors of the person who died take the wrongful death money?

A: Generally not the sec. 2 award, which goes to the family under sec. 1. The exception is c. 229, sec. 6A: if the estate’s own assets fall short, the sec. 2 recovery is subject to administration charges, funeral expenses, the medical and hospital bills of the fatal injury, and reasonable attorneys’ fees and costs. The conscious suffering award under sec. 6 is an estate asset and is available to estate creditors.

Q: Is interest on a wrongful death judgment taxable?

A: Yes. Interest is income, not damages for a physical injury, so it is taxable to whoever receives it even when the award it is attached to is excluded. When a case reaches judgment after several years, the interest portion can be large, so it helps to know the figure before the money is divided.

Q: Will I get a Form 1099 for a wrongful death settlement?

A: It depends on how the payer documented the payment. A payment for excluded compensatory damages often comes with no Form 1099, while a payment labelled as punitive damages or interest may come with one. Either way, the form does not decide the tax treatment; the law and the settlement papers do, so bring both to a tax preparer.

Q: Is Jimmy Knows AI giving me legal advice?

A: No. This page is general information about Massachusetts law and federal tax rules for educational purposes. It is not legal or tax advice for your situation and does not create an attorney-client relationship. For advice about your family’s claim, call Jim Glaser Law at (617) JIM-WINS, and take tax questions about your own return to a tax preparer.