How Wrongful Death Settlements Are Distributed Among Heirs in Alabama
Wrongful death settlements in Alabama bypass the deceased's will completely. Instead, funds are distributed strictly according to Alabama's intestate succession laws, and creditors cannot claim this money to pay off the deceased's debts.
When a wrongful death lawsuit results in a settlement or jury verdict in Alabama, families often assume the money will be distributed according to the deceased person's Last Will and Testament. However, Alabama law dictates a completely different path. Understanding how these funds are divided is crucial for surviving family members in Montgomery, Birmingham, Dothan, and across the state. If you are unsure of your rights as an heir, consider consulting a local probate attorney found in our US Lawyers Directory.
Why Wrongful Death Settlements Bypass the Will in Alabama
In Alabama, the proceeds from a wrongful death claim are not considered part of the deceased person's standard estate. According to Ala. Code § 6-5-410, the damages recovered must be distributed according to the statute of distributions (intestate succession laws). This means that even if the deceased left a valid will giving all their assets to a best friend or a charity, the wrongful death settlement money completely ignores the will and goes directly to the legal heirs defined by state law.
Surviving Spouses vs. Children
The distribution of funds relies on Ala. Code § 43-8-41 and Ala. Code § 43-8-42, which outline the state's rules for intestate succession. The division primarily depends on who survives the deceased. Here is how the law generally breaks down the distribution:
| Family Dynamic | How the Settlement is Distributed |
|---|---|
| Surviving Spouse, No Children, No Parents | The spouse receives 100% of the wrongful death settlement. |
| Spouse and Parents, No Children | The spouse gets the first $100,000 plus half of the remaining balance. Parents get the rest. |
| Spouse and Children (All belong to the Spouse) | The spouse gets the first $50,000 plus half of the remaining balance. Children split the rest. |
| Spouse and Children (From a Previous Relationship) | The spouse receives 50% of the settlement. The deceased's children split the other 50%. |
| Children, No Surviving Spouse | The children split 100% of the settlement equally. |
What Happens if There Are No Immediate Heirs
If the deceased passed away without a surviving spouse, children, or parents, the law dictates that the money moves down the family tree. Under Alabama's intestate laws, the funds would then be distributed to surviving siblings. If there are no siblings, the court looks to grandparents, aunts, uncles, or cousins. The exact distribution must be approved by a judge in a court such as the Montgomery County Probate Court, Montgomery or the Jefferson County Probate Court, Birmingham.
Why Creditors Cannot Touch Wrongful Death Funds
One of the most significant benefits of Alabama's wrongful death statute is its absolute protection against creditors. Because the damages are exclusively punitive and bypass the traditional estate, the law clearly states that these funds are not subject to the payment of the debts or liabilities of the testator or intestate. This principle was solidified in the case Steele v. Steele, 623 So. 2d 1140 (AL Supreme Court 1993), ensuring that credit card companies, medical providers, or mortgage lenders cannot seize the settlement money to satisfy the deceased person's outstanding debts.
Step-by-Step Process in Alabama
Receiving the settlement is not automatic. The personal representative must follow strict legal steps to disburse the funds lawfully.
Step 1: Deposit the Settlement Funds
Once a settlement is reached or a jury verdict is paid, the defendant's insurance company will issue a check. The personal representative's attorney will deposit these funds into a secure legal trust account.
Step 2: Pay Legal Fees and Court Costs
Before any heirs receive money, the attorney's contingency fees (usually 33% to 40%) and any case expenses (like expert witness fees or court costs) are deducted directly from the gross settlement amount.
Step 3: Petition the Court for Distribution
The personal representative must file a petition in the probate or circuit court detailing how the net settlement will be divided according to Alabama intestate law. A judge must review and approve this distribution plan to ensure compliance with the statute.
Step 4: Disburse the Funds to Heirs
Once the judge signs the order, the attorney or the personal representative will write individual checks to the legal heirs according to their statutory share.
Timeline & Costs
The actual disbursement of funds typically takes between 30 to 60 days after the settlement check is received and clears the trust account. Court filing fees to approve the distribution plan are nominal (under $100). The primary deduction from the settlement is the lawyer's contingency fee. Because the funds bypass the traditional estate, families avoid the lengthy delays of a standard probate process, and they do not have to wait out the 6-month creditor claim period that standard estates face.
Frequently Asked Questions (FAQ)
Does a wrongful death settlement have to go through probate in Alabama?
The funds themselves are not subject to standard probate administration or creditor claims, but the probate court or circuit court must still formally approve the final distribution plan to ensure it matches Alabama's intestate laws.
Can a deceased person's will change how the settlement is split?
No. By law, wrongful death proceeds in Alabama strictly follow intestate succession rules. A valid will has no power over how wrongful death settlement money is distributed.
Are wrongful death settlements taxable in Alabama?
Generally, no. While punitive damages are typically taxable under federal law, Alabama wrongful death recoveries are protected by a specific exception under 26 U.S.C. § 104(c). Because Alabama's wrongful death statute (Ala. Code § 6-5-410) provides exclusively for punitive damages, federal tax law explicitly excludes these proceeds from gross income, meaning they are not subject to federal income tax.
Can the hospital take my wrongful death settlement for medical bills?
No. Alabama law strictly protects wrongful death settlement funds from the deceased person's creditors, including hospitals and healthcare providers.
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