Why most asbestos trust fund payments are not taxable
Asbestos trust funds are set up to compensate people who developed serious health problems because of asbestos exposure. The payments typically include medical bills, lost wages, pain and suffering and other damages related to the illness. Because this money compensates for physical harm rather than representing any kind of financial benefit, the IRS generally doesn't tax it.
This applies whether the compensation comes from an asbestos bankruptcy trust or a lawsuit settlement. The IRS looks at why the payment was made rather than where it came from, so trust fund payments for a physical illness like mesothelioma or asbestos-related lung cancer are generally treated the same as a court award for the same condition. Family members who receive payments after a loved one's death are typically covered under the same principle.
That said, specific circumstances can affect tax treatment. Punitive damages, interest accrued on a payment, or recoveries that involve multiple compensation sources may be handled differently, which is why consulting a professional before filing is a sound step for anyone receiving a larger recovery.
Talk to ELG Law about your asbestos claim
If you or a family member developed mesothelioma or lung cancer and have not yet filed an asbestos claim, ELG Law can review your eligibility at no cost. Our attorneys have spent over three decades representing individuals whose occupational exposure led to a serious diagnosis. Reach out to ELG Law today and let us review your employment and medical records to determine whether you have a claim.