No, the IRS will not tax lawsuit settlement proceeds that a court awards for physical illness or injury, these are non-taxable and include wrongful death settlements.
It's recommended that you review and compare any legal documents received to the information found at:
https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments
and determine whether payment includes other item such as punitive damages which may be taxable.
Hello MTB50,
Thank you for participating in the Ask the Experts Event. As to your question, according to this link, punitive damages awarded for wrongful death are excludable from federal taxable income (see 6th paragraph under the Analysis section).
I hope that helps.