Various family members of Alfred Olango, an unarmed black man who was fatally shot by San Diego police in September, are seeking damages against the officer who filed the fatal shot and the Department.
The wrongful death lawsuit alleges that Olango was needlessly gunned down after Olango’s family had called the police to report that he was having a mental breakdown and needed assistance. Reports claim that the police, after arriving on the scene, perceived Olango as aggressive and resistant to instruction.
As Olango paced in a public parking lot police insisted that he remove his hands from his pockets. As he did so, an officer believed he took a “shooting stance” and removed a “cylindrical object” – which was an innocent vaping device – from his pockets. The officer fired four shots, killing Olango. His family insists that the police should have been aware of the delicate mental state of the victim and taken care to help him, not kill him.
The officer will not face criminal charges, but the family is seeking damages from the Department and shooting officer to quell the grief they struggle with in the wake of their loved one’s untimely death. If the family members of the anguished, unarmed shooting victim do recover compensation for his death they will likely have one burning question: is that award taxable?
Types of Compensation Available in a Wrongful Death Claim
Damages awarded in wrongful death settlements and verdicts fall into two distinct categories: economic and non-economic. Whether or not damages are taxable depends on the characterization of the award.
Economic damages – often referred to as compensatory damages – are those awarded to compensate a family for out-of-pocket, verifiable expenses resulting from the unexpected death of their loved one. These can include funeral costs, burial plots or cremation, medical expenses prior to death, and lost wages. Economic damages are easily calculated and recognizable. If Olango’s family is awarded economic damages they will not be subject to income tax.
Compensatory/economic damages are awarded to help families recover from financial expenditures they incurred as a result of the death of their loved one. They are intended to, in essence, reimburse them for their costs. Since the family has already paid taxes on the monies used to cover these expenses the IRS does not see the value in taxing them again. It is important to note that if the family had taken deductions for medical expenses for Olango the amount of the award equal to those deductions would be taxable.
Non-economic compensation is that awarded for intangible and incalculable damages such as emotional distress, pain and suffering, loss of consortium, or loss of companionship. The value or worth of these damages are much more difficult to value and are not repaying victims for any financial expenditures. Any non-economic damages awarded to Olango’s family will be taxable by the Federal government and California.
When a family files a wrongful death lawsuit one of the leading factors driving their motivation is probably revenge. They want the at-fault party to pay for what they did. The want the person or person(s) who killed their loved one to be punished. Punitive damages, however, are typically not permitted in California wrongful death lawsuits. Juries are only permitted to award punitive damages to families whose loved one was killed in a felony-murder for which the at—fault party was convicted. Punitive damages are non-economic in nature and, if awarded, will be fully taxable.
Wrongful Death Awards May Trigger Estate Tax
While compensatory damages may not trigger Federal or California income tax, if the award is large enough it may trigger estate taxes. Most damages recovered in wrongful death cases are considered to be part of the decedent’s estate. If the award is substantial it may cause the value of the estate to exceed the threshold amount, which for 2017 is $5.49 million.
Mr. Olango met an untimely and gruesome end, and his family will have to struggle with his death for the duration of theirs. Police departments are partly funded by tax dollars, so the Olangos may have mixed emotions if they recover compensation for the wrongful death of their loved one if they find out a portion is taxable. Economic or compensatory damages recovered will not be taxable. Non-economic damages – those awarded for the anguish and grief they are likely wrestling – will trigger income tax liability.