By Samuel Dolce, Esq. (Republished from LinkedIn)
As America continues to grapple with the #MeToo movement, the large-scale civil law suits the movement brought are beginning to settle. Survivors are finding justice and monetary compensation through the civil trial process. And while trial attorneys have tackled the challenge of building cases with limited evidence, complex moral underpinnings, and unfortunate jury sentiments, survivors are now finding themselves in a new position. They’re getting a settlement check.
I think it goes without saying that a trauma is never worth any settlement amount. Peace of mind and body is the greatest gift anyone can be given. And I am inspired and motivated by the stories of the survivors in my own life and who I work with daily.
Many trial attorneys will refer to adversarial trial practice as a “battle”. And as all counsel know, a trial can become an embittered struggle between ideologies. Within the broader context of the #MeToo movement, this clash can become even more heated and contentious. Yet, as these cases begin to settle and be brought to verdict, oftentimes the survivors’ interests can become overlooked. This is where comprehensive settlement planning is at its most valuable.
Comprehensive settlement planning
Plaintiffs in the personal injury context receive tax protection on their settlements. Personal injury settlements are excluded from gross income and can be used to fund a periodic payment obligation (sometimes referred to as a structure) in order to provide for that plaintiff over the course of their life. The entire settlement and earnings on the settlement when placed within a periodic payment obligation are treated as tax free. We as a society have decided to recognize a plaintiff’s struggle with this tax benefit. Therefore, we do not tax personal injury settlements.
But how does the phrase “personal injury” fit into the #MeToo movement? While sexual harassment and assault are the most personal of injuries, and there are elements of aggression, violence, and injury in every claim, there remains a fair amount of confusion surrounding sexual harassment and assault settlements and their taxability. Are these #MeToo type settlements tax free?
I am an attorney, and a comprehensive settlement planning consultant, yet I am not a tax-attorney. However, members of our firm have read and discussed at length a series of Internal Revenue Service Internal Legal Memorandum, Private Letter Rulings, and relevant court decisions. We have surmised that it is our moral, political, and legal imperative to treat survivor’s settlements as personal injury settlements, and to provide survivors with the same tax-free structures other personal injury claimants have received for decades.