Liens, Taxes and Benefits After a Wrongful Death

When your family is grieving, paperwork from hospitals, insurers and government agencies is the last thing you want to face. Knowing what to expect can ease some of the worry. This chapter explains who may have a right to be repaid from a settlement, how taxes generally work, and what benefits may be available apart from the case.

Unpaid medical bills and the two claims

Families often receive bills for the emergency care or hospital stay before a death. Ohio law recognizes two separate claims, as our chapter on wrongful death and survival claims explains.

The survival claim is the claim your loved one could have brought had they lived. The Supreme Court of Ohio has described it as the way the estate recovers for the injuries the person suffered before death, and losses such as the cost of final medical care are generally pursued through it. The estate's personal representative (the executor or administrator) brings it.

The wrongful death claim is different. Under R.C. 2125.02(A), it is brought for the "exclusive benefit" of the surviving spouse, children, parents and other next of kin, and it compensates them for their own losses, described in our damages chapter. It can also include reasonable funeral and burial expenses, which go to the personal representative to pay those costs (R.C. 2125.02(C)(1), 2125.03(B)). R.C. 2125.03 directs that the rest be distributed to the beneficiaries. Neither statute lists the estate's creditors among those who share in a wrongful death recovery. Ask your lawyer before paying any medical bill from your own funds.

Medicare

If your loved one was on Medicare, Medicare may have paid for care related to the injury. Federal law calls these conditional payments: Medicare pays first, on the condition that it is repaid if a liability insurer later pays for the same care (42 U.S.C. 1395y(b)(2)).

The rules are strict. Medicare may recover from anyone who receives the payment, including a beneficiary or an attorney, and repayment is due within 60 days, with interest if late (42 C.F.R. 411.24).

There is some relief. When the claim was disputed and the family paid attorney fees and costs, Medicare reduces its recovery by its proportional share of those costs (42 C.F.R. 411.37). According to the Centers for Medicare & Medicaid Services, the case is reported to its Benefits Coordination & Recovery Center, which lists related payments and, after settlement, issues a final demand explaining waiver and appeal rights.

Ohio Medicaid

If your loved one had Medicaid, the Ohio Department of Medicaid has an automatic right to recover what it paid for care from a third party who caused the harm (R.C. 5160.37(A)). Written notice naming the responsible party must be given within 30 days after starting recovery efforts or filing suit. No settlement may become final until Medicaid has notice and a reasonable chance to protect its rights; without notice, the recipient and attorney can be liable for repayment.

The statute also sets limits. Reasonable attorney fees (up to one third) and costs come off first. Medicaid is then presumed to receive at least half of what remains or the amount it paid, whichever is less. A party, including an estate's executor or administrator, can challenge that presumption at a hearing by clear and convincing evidence (a high level of proof) while the disputed amount is held in escrow or a lawyer's trust account. R.C. 5160.37 does not mention wrongful death or survival claims by name.

Federal law adds another limit. In Arkansas Dept. of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (2006), the U.S. Supreme Court held that a state Medicaid agency could not take more than the portion of a settlement that represented payment for medical care. In Gallardo v. Marstiller, 596 U.S. 420 (2022), the Court explained that the dividing line is between medical and nonmedical expenses, and held that a state may seek reimbursement from settlement amounts for medical care, past or future.

Private health insurance

Health plans often claim subrogation or reimbursement, a right to be paid back from a recovery for bills they covered. Under R.C. 2323.44, when less than the full value of a claim is recovered because of shared fault, limited insurance or other reasons, the plan's claim is reduced in the same proportion, and either side may ask a court to resolve a dispute. The statute covers an estate's survival claim, but its definition of "injured party" leaves out a beneficiary's wrongful death claim.

Some employer plans are self-funded: the employer pays claims itself instead of buying insurance. In FMC Corp. v. Holliday, 498 U.S. 52 (1990), the U.S. Supreme Court held that self-funded plans governed by ERISA (a federal benefits law) are exempt from state laws regulating insurance. In US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013), it held that the plan's terms govern reimbursement, though a plan silent on attorney fees shares the cost of obtaining the recovery. Reading the actual plan document matters.

Federal income taxes

As a general rule, the federal tax code excludes from income damages "received on account of personal physical injuries or physical sickness," other than punitive damages (26 U.S.C. 104(a)(2)). IRS Publication 4345 says punitive damages are taxable even in a physical injury settlement, interest is generally taxable, and taxability depends on all the facts. How this applies to a particular wrongful death recovery is a question for a tax professional.

A narrow exception for punitive damages in wrongful death cases (26 U.S.C. 104(c)) applies only where state law, as of September 13, 1995, allowed only punitive damages in a wrongful death action. Ohio's statute allowed compensatory damages before that date. This is general information, not tax advice; please talk with a tax professional before a settlement is final.

Benefits for survivors

• Social Security survivors benefits. The Social Security Administration says a spouse, ex-spouse, child or dependent parent of someone who worked and paid Social Security taxes may be eligible. Age, disability and marriage rules apply.
• Social Security lump-sum death payment. SSA describes a one-time payment of $255 to a surviving spouse, or to certain children if there is no spouse. You must apply within two years of the death.
• Ohio workers' compensation. If the death was work-related, R.C. 4123.59 provides weekly death benefits to dependents, and R.C. 4123.66 (effective September 26, 2025) provides reasonable funeral expenses up to $7,500. The Ohio Bureau of Workers' Compensation says death claims usually must be filed within one year of the death, with some exceptions.

Life insurance and Social Security survivor benefits are generally paid under their own rules, separate from the wrongful death claim. Ohio's collateral source statute, R.C. 2315.20, lets a defendant in some cases show the jury certain benefits the family received, but not life insurance (with a narrow employer exception) or benefits from a source with a right to be repaid, and it does not apply to medical malpractice claims.

Why liens are resolved before money is distributed

A careful lawyer identifies possible liens early, requests final figures, and negotiates reductions where the law allows. Money stays in a trust account until final lien letters arrive, so your family is not surprised later by a demand for repayment.

A wrongful death settlement also needs the probate court's consent (R.C. 2125.02(E)), and the court approves how the money is shared among family members. Our probate chapters on approving a settlement and shares for children walk through that process. Unfamiliar terms are defined in our glossary.

Common questions