Wrongful Life Damages 

John Darer • October 17, 2019

New IRS Private Ruling Says Wrongful Life Settlement Income Tax Free

Wrongful Life Claims

A recent IRS Private Letter ruling suggests relief is available in wrongful life cases.

What is a Wrongful Life Lawsuit?

Wrongful life action is a lawsuit brought by or on behalf of a child with birth defects, alleging that but for the doctor-defendant’s negligent advice, the parents would not have conceived the child, or if they had, they would have aborted the fetus to avoid the pain and suffering resulting from the child’s congenital defects. However, most jurisdictions reject these claims, according to US Legal. Parents in such situations are faced with substantial medical costs related to the care of children born with congenital disorders.

Where Wrongful Life Cases Exist, What Solutions Were Available?

Some tax relief was available through tax deferral mechanisms such as non qualified assignments or reinsurance structured settlements.

New PLR Provides Clarity That Wrongful Life Settlement is Income Tax-Free

The Private Letter Ruling, or PLR, which I learned about at a meeting in Chicago yesterday (will not be published until December), provides clarity that these settlements are income tax free. The real world benefit of tax-free status, means that more money remains available for the child's future care and opens the possibility of structured settlements with more favorable tax consequences. By using structured settlements in traditional medical malpractice cases, the funds grow income tax free and can be tailored to meet a child's specific medical needs.

The PLR was requested on behalf of a specific client with a wrongful life claim by industry colleagues and the National Structured Settlements Trade Association. Had the claim been subject to taxes, much of the settlement would have been lost. Thanks to this ruling, the family will have the funds necessary to provide ongoing medical care for their child, according to a release dated October 16, 2019.

Keep this is mind if you are a medical malpractice lawyer in a jurisdiction that allows such claims.

settling parties shaking hands at the end of the settlement negotiations
By John Darer September 22, 2025
John Darer reviews qualified assignment best practices. It starts with an understanding that a qualified assiignment is an "assignment of a liability to make periodic payment as damages" of the charactaer described in IRC 130(c) and IRC 104(a)(2) or IRC 104(a)(1)
Weiss Ratinggs  of structured settlement annuity issuers
By John Darer September 22, 2025
John Darer reviews Weiss ratings. Weiss ratings became the first insurance rating organization to issue independent financial strength ratings for life and health insurance companies.
By John Darer September 17, 2025
The Allure of "Convenience" is a Tax Trap . QSF Qualification is not a single moment in time, but rather a continuing obligation to operationalize all the requirements, as well as those required for creation.
qualifed assignment release and pledge agreement
By John Darer September 15, 2025
A Qualfied Assignment Release and Pledge Agreement (QARP) is a type of qualified assignment that gives a structured settlement payee a security interest in the qualified funding asset pursuant to the Uniform Commercial Code (UCC).
Indiiduals with Disabilities Education Act
By John Darer September 13, 2025
It bears remembering that, prior to 1975, children in the USA with intellectual disabilities, physical disabilities and even sensory disabilities were not guaranteed access to a public education.
structured settlement beneficiary
By John Darer CLU ChFC MSSC CeFT RSP CLTC September 12, 2025
"All payments From a Structured Settlement Are Guaranteed" ?
woman surprised when she discovers something
By John Darer September 6, 2025
Does a Structured Settlement Have a Free Look Period like Life insurance? The Shocking Misleading Answer Provided by AI.
qualified settleent fund and QSF
By John Darer September 3, 2025
Invalidation of Structured Settlement Arrangements Under IRC § 130. If the QSF loses its status due to revocation/ termination of the governmental authority’s continuing jurisdiction, any structured settlement arrangements pursuant to IRC § 130 become null and void.
most infomative structured settlement websites
By John Darer August 26, 2025
The 4structures.com website is one of the most comprehensive structured settlement resources, particularly for those who want detailed, expert-level information, according to Google AI
most informative
By John Darer August 22, 2025
Based on Grok's review of prominent sites as of August 2025, 4structures.com (including its associated blog at structuredsettlements.typepad.com) stands out as the most comprehensive. Run by structured settlement expert John Darer, it offers detailed guides, and specialized insights
More Posts