I am the personal representative of my Uncle's estate who passed away in 2008. We closed his estate and filed all the necessary paperwork with the IRS. However, he had an opened class action asbestos lawsuit going at the time of his death. I reopened the estate to deposit the checks that the lawyers had payable to his estate over the years. Now, I received a letter from the lawyers for final closure of the asbestos lawsuit tht was filed by him. There is about $1,500 remaining in this opened estate account - do I need to file any forms with the IRS and is this money considered taxable to me? I did reopen the estate with the register of wills so I could deposit these checks that were coming in. I was reading articles stating that Class Action asbestos lawsuits are not taxable, but not sure if this applies to an estate account.
Sue
Generally, settlements for physical injury are not taxable, including pain and suffering when caused by physical injury. However, if the settlement contains punitive damages or interest (due to the length of time it takes to pay out), the punitive damages and interest portion are taxable. You would have to check with the attorney to see if the payments include these items.