Re: How to invest 300k for a 40 year old who needs to live off of it.

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Number of messages in the thread: 1

1. Date: 2007-01-05 09:58:34
Subject: Re: How to invest 300k for a 40 year old who needs to live off of it.
From: "e...@g...com" <e...@g...com> Search message by this author

Elizabeth Richardson wrote:
> I believe this is incorrect. Her investment will not be taxed. Insurance
> settlements are non-taxable events. Only the earnings will be taxed.

> Elizabeth Richardson

Elizabeth, I'm afraid you are incorrect. First, the OP did not say
that it was a settlement, he said his mother "won" a lawsuit. Second,
there is no such rule that "insurance settlements are non-taxable
events." It doesn't matter who pays, it matters what the money is
being paid to compensate, ie, general damages? special damages?
punitive damages? Each of them have different tax treatment, and it
also depends on which circuit court of appeal jurisdiction the OP lives
in since the federal appellate courts are split on some of these
issues.

It may be true that the earnings in a structured settlement paid
directly to the plaintiff as part of a settlement may not be taxable,
but that does not mean that all insurance settlements are non taxable.

The bottom line is there are a lot of issues involved that have to be
reviewed and the OP needs to seek a tax professional who understands
the tax implications of lawsuit damage awards and settlements.