First, you need to determine if the income is taxable at all.
In general, legal settlements that represent compensation for physical illness or injury are not taxable. If part of the settlement represents punitive damages, or interest due to delayed payment, that portion is taxable but not the entire settlement. Legal fees are not deductible.
https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments
https://www.irs.gov/pub/irs-pdf/p4345.pdf
For example, suppose the gross settlement is $50,000, representing $45,000 for injury and $5000 for interest. Only the $5000 interest payment is taxable. However, suppose you only received $25,000 net because there were $25,000 of legal fees. The entire $5000 of interest is still taxable income.
Then, whatever portion of the settlement is taxable, you follow the rules noted above for income in respect of a decedent.
