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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple style='word-wrap:break-word'><div class=WordSection1><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Please, everyone, be very careful. What we think of as personal injuries is not the same as the IRS’s definition. Some of what we assume would be not taxed as personal injuries is taxed. Emotional damages, for example. Everyone so far has said the right thing – if there is anything significant at stake, bring in a CPA. Before you settle. Settlement characterizations are not binding on the IRS but they can be shaped to be somewhat useful. <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>This is a good chance to do a very good thing for your client’s net return, if done right. Sort of like figuring out subrogation/reimbursement and getting ahead of that game. <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Just ask Dennis Rodman. He can tell you.:) <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Rob <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><o:p> </o:p></span></p><div><div style='border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b>From:</b> wsbapt-bounces@lists.wsbarppt.com <wsbapt-bounces@lists.wsbarppt.com> <b>On Behalf Of </b>Eric Nelsen<br><b>Sent:</b> Wednesday, November 18, 2020 9:49 AM<br><b>To:</b> WSBA Probate & Trust Listserv <wsbapt@lists.wsbarppt.com><br><b>Subject:</b> Re: [WSBAPT] Wrongful death and survival action<o:p></o:p></p></div></div><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I wrote the below and then did a Google search and came up with this, confirming PI settlements are not taxable as income except to the extent you recovered reimbursement for an expense that you previously used as a deduction:<o:p></o:p></p><p class=MsoNormal><a href="https://www.irs.gov/pub/irs-pdf/p4345.pdf">https://www.irs.gov/pub/irs-pdf/p4345.pdf</a><o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I have a couple thoughts on the taxation issue, but I agree with everyone else that if there are large amounts of money at stake here, and large potential tax liability, I would go to the expense of having a CPA or a tax litigator such as <a href="https://www.robertchicoinelaw.com/attorneys/robert-chicoine/">Bob Chicoine</a> or <a href="https://www.colvinhallettlaw.com/">Colvin + Hallett</a> review the scenario.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><ol style='margin-top:0in' start=1 type=1><li class=MsoListParagraph style='margin-left:0in;mso-list:l0 level1 lfo3'>I cannot believe that wrongful death proceeds could be considered part of the Estate for estate tax purposes, and they cannot be income of the Estate in any conceivable scenario that I can think of. By definition they never belong to the decedent in any fashion; the cause of action belongs to the beneficiaries, and the measure of damages is based on their losses caused by the death of the decedent and not the decedent's personal losses. Case law is explicit that the PR acts as nominal plaintiff only, and has no claim on the proceeds.<o:p></o:p></li></ol><p class=MsoListParagraph><o:p> </o:p></p><ol style='margin-top:0in' start=2 type=1><li class=MsoListParagraph style='margin-left:0in;mso-list:l0 level1 lfo3'>A settlement can involve settlement of causes of action not framed by the pleadings; logically, if one can settle a cause of action before filing suit, then one can settle a cause of action that isn't filed even while other causes of action have been filed. The PR has a duty to pursue all the viable causes of action, so I think the settlement necessarily has to be for the Personal Injury survivorship (4.20.046), Personal Injury Causing Death (4.20.060), and Wrongful Death (4.20.010), collectively, regardless of which ones are framed by the pleadings (so long as no statute of limitations has barred an unfiled cause of action).<o:p></o:p></li></ol><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Now there is the allocation problem: how much of the settlement goes to PI/PICD (which are the same measure of damages) versus how much goes to the WD damages. I would start with the assumption that, if you have a policy-limits settlement, then the total recovery is less than the actual total damages that could have been awarded. Therefore, nobody is going to be fully compensated for their losses; the settlement is a compromise. (If you don't have a policy-limits settlement, then you will need to evaluate each claim more carefully and make some educated guesses about how much each claim might have been worth if it went to a jury.)<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>If your beneficiaries under the WD and PICD claims are the same group of people, I think there is a strong argument to be made that all the proceeds should go to them, and nothing should go to the estate except for just enough money to pay any medical expenses or other debts that the estate owes (under a proper creditor claim or arguably by subrogation) and that logically would be paid if the person had survived and had brought a simple PI action. So the recovery of lost wages is "zero" in that case.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I think, from the perspective of a PR's duties, that it is more important to recover funds that directly benefit WD beneficiaries and PICD beneficiaries than it is to recover money that would go into an estate pool subject to debts and estate creditors and, arguably, income tax.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>The PR's duty runs to beneficiaries of a WD action and PICD action directly; I think that has to be given some level of priority over the administrative duties to settle the probate estate, which only include the duty to "pursue a cause of action" as one factor amid a much broader set of tasks. If the PR is focusing on best net total recovery for all beneficiaries, then allocating the settlement to maximize net recovery to the beneficiaries makes the most sense. The IRS is not a beneficiary and the PR has no duty to allocate funds just so the IRS can tax them. The PR's duty arguably is the opposite: to pay any lawful tax when due, but not to do anything that would cause an increased tax burden without good reason.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I don't know if the IRS is even capable of challenging allocation of a settlement. But if they are, the safest route for the PR would be to file a motion with the court for approval of the allocation scheme, lay it out for the court to review, and get a court order approving it and directing the PR to distribute the proceeds in that fashion. That should insulate the PR from liability.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>I can't really back any of this up with case law; I haven't been able to find any with good guidance on how to allocate among the causes of action. Just my thoughts about it, at this point.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><div><p class=MsoNormal>Sincerely,<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Eric<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Eric C. Nelsen<o:p></o:p></p><p class=MsoNormal>Sayre Law Offices, PLLC<o:p></o:p></p><p class=MsoNormal>1417 31st Ave South<o:p></o:p></p><p class=MsoNormal>Seattle WA 98144-3909<o:p></o:p></p><p class=MsoNormal>206-625-0092<o:p></o:p></p><p class=MsoNormal><a href="mailto:eric@sayrelawoffices.com"><span style='color:#0563C1'>eric@sayrelawoffices.com</span></a><o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><b><span style='background:aqua;mso-highlight:aqua'>Covid-19 Update - </span></b>All attorneys are working remotely during regular business hours and are available via email and by phone; please call the Seattle office. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis; please call the Seattle office.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>MAIL AND DELIVERIES can be received at the Seattle office. For any other needed arrangements, please call the Seattle office.<o:p></o:p></p></div><p class=MsoNormal><o:p> </o:p></p><div><div style='border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b>From:</b> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>> <b>On Behalf Of </b>Andrekita Silva<br><b>Sent:</b> Tuesday, November 17, 2020 5:26 PM<br><b>To:</b> Philip N. Jones <<a href="mailto:pjones@duffykekel.com">pjones@duffykekel.com</a>><br><b>Cc:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br><b>Subject:</b> [WSBAPT] Wrongful death and survival action<o:p></o:p></p></div></div><p class=MsoNormal><o:p> </o:p></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'>Law Office of<br><strong><span style='font-family:"Arial",sans-serif'>F.ANDREKITA SILVA</span></strong><br><strong><span style='font-family:"Arial",sans-serif'>________________________________________________________________________</span></strong><br> <br>. November 17, 2020 <br><br><br>Philip,<br><br>Thank you for your comments, <br><br>In our case, we initially sued under the survival statute because there were no beneficiaries that qualified under the wrongful death statute.<br><br>In late July 2019, the wrongful death statute was amended and gave the parents a right of action for wrongful death. <br><br>We never actually amended the pleadings because we eventually we settled and didn't need to.<br><br>However, we put all parties on notice that the parents were seeking damages pursuant to the wrongful death statute, and all defendants did extensive discovery on that issue. <br>So, it wasn't a last minute change. But, the settlement didn't say what the settlement was for - compensation to deceased for lost earnings, compensation to deceased for pain and suffering, compensation to beneficiaries for xyz etc.<br><br>Can I distribute net proceeds to the Estate ? For PR to distribute to beneficiaries? <br><br> <br><br><br></span><span style='font-size:8.5pt;font-family:"Arial",sans-serif;color:#222222;background:white'>andrekita</span><span style='font-size:8.5pt;font-family:"Arial",sans-serif;color:#222222'><br><span style='background:white'>Law Office of F. Andrekita Silva</span><br><span style='background:white'>1325 Fourth Avenue, Suite 2000</span><br><span style='background:white'>Seattle, Washington 98101</span><br><span style='background:white'>206-224-8288</span><br><span style='background:white'><a href="http://www.seattle-silvalaw.com">www.seattle-silvalaw.com</a></span></span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><br><br>Quoting "Philip N. Jones" <<a href="mailto:pjones@duffykekel.com">pjones@duffykekel.com</a>>:<o:p></o:p></span></p><blockquote style='border:none;border-left:solid blue 1.5pt;padding:0in 0in 0in 9.0pt;margin-left:1.5pt;margin-top:5.0pt;margin-bottom:5.0pt'><div><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><br><br><br></span><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>I suggest that you go back to the original cause of action/complaint, and see what you were suing for. If it was a combination of wrongful death and survivorship (pain and suffering), then it will be difficult to now take the position that it is now 100% one or the other. The IRS is not very friendly towards people who change their tune in order to reduce the taxes. </span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>On the tax side, are you referring to income taxes or estate taxes? You need to examine both and be certain of your conclusion. It is my recollection that survivorship proceeds are subject to estate tax, but wrongful death proceeds are not. But check for yourself. And look into the income taxes. My hunch is that no income taxes are owed, but check for yourself to make certain.</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>I express no opinion on your other questions. Find someone who does lots of wrongful death.</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Phil Jones</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><div><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Philip N. Jones</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Duffy Kekel LLP</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>900 S.W. Fifth Ave. Suite 2500</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>Portland, OR 97204</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'><a href="mailto:pjones@duffykekel.com">pjones@duffykekel.com</a></span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>(503) 226-1371 – office</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>(503) 853-1482 – cell</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:14.0pt;font-family:"Times New Roman",serif'>(503) 226-3574 - fax</span><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p></div><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><div><div style='border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><b><span style='font-size:10.5pt;font-family:"Arial",sans-serif'>From:</span></b><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>> <b>On Behalf Of</b> Andrekita Silva<br><b>Sent:</b> Tuesday, November 17, 2020 4:25 PM<br><b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br><b>Subject:</b> Re: [WSBAPT] Testamentary Trust<o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p></div></div><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'>Law Office of<br><strong><span style='font-family:"Arial",sans-serif'>F.ANDREKITA SILVA</span></strong><br><strong><span style='font-family:"Arial",sans-serif'>________________________________________________________________________</span></strong><br> <br>. November 17, 2020<br><br><br>List serve,<br><br> I understand that the proceeds from a wrongful death action do not belong to the estate, rather to the beneficiaries (thank you to Eric Nelsen for a really great summary on this issue earlier this year). I also understand the proceeds from a survival action are more of a muddle. I know there are no taxes for pain and suffering experienced by the decedent for a physical injury.<br> I’d like to close the probate with a Declaration of Completion. Without the survival/ wrongful death action, the estate had extremely modest assets and we settled with all creditors. But, the Declaration of Completion must say all U.S. and Washington estate tax due as a result of Decedent's death have been determined, settled, and paid.<br> So, if we decide that settlement proceeds are for pain and suffering of the decedent, can I assume that this statement about taxes applies to only the Estate? This has nothing to do with any taxes that the beneficiary might owe in their own U.S. state or foreign country?<br> The proceeds from the survival/ wrongful death action are in my trust account. I would prefer to pay the net proceeds to the personal representative for HER to distribute to the beneficiaries (herself and her brother.) They are in agreement as to how much they will each receive. My main concern is to avoid liability for myself if there is a tax issue down the line. Is this okay to do?<br> <br>andrekita<br>Law Office of F. Andrekita Silva<br>1325 Fourth Avenue, Suite 2000<br>Seattle, Washington 98101<br>206-224-8288<br><a href="http://www.seattle-silvalaw.com">www.seattle-silvalaw.com</a><br> <br><br> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'> <o:p></o:p></span></p></div></blockquote><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><br> <o:p></o:p></span></p><p><span style='font-size:10.5pt;font-family:"Arial",sans-serif'><o:p> </o:p></span></p></div></body></html>