A construction worker falls from a scaffold in Brooklyn. The injury is severe, the recovery will be long, and the personal injury lawsuit will likely take years to resolve. His family knows a potential settlement could be substantial—enough to provide for them if he can no longer work. But what happens if he passes away before the case concludes? Many families assume the settlement money would simply pass to his spouse and children. The reality is far more complex and is dictated not by the family’s wishes, but by the Surrogate’s Court.
In my practice, I’ve seen how an unexpected event like a personal injury claim can intersect with a family’s long-term financial health. The focus is often on winning the case, with little thought given to what happens to the proceeds. Without deliberate planning, a settlement meant to secure a family’s future can instead become a source of delay, expense, and conflict within an estate.
A Lawsuit is an Asset of the Estate
When a person with a pending personal injury claim dies, the legal claim itself—known as a “chose in action”—does not disappear. It becomes an asset of their estate, just like a bank account or a piece of real estate. The authority to continue the lawsuit passes to the fiduciary of the estate, who is either an executor named in a will or an administrator appointed by the court if there is no will.
This means the fiduciary—not the family—steps into the decedent’s shoes to manage the litigation. They will make decisions about settlement offers and trial strategy, guided by their fiduciary duty to act in the best interests of the estate and its beneficiaries. When the case is finally resolved, any funds recovered for the personal injury claim flow directly into the estate. They do not go straight to the surviving spouse or children.
Once in the estate, the funds are first used to pay the decedent’s debts, legal fees, and administration expenses. Only after all these obligations are settled is the remainder distributed to the beneficiaries named in the will or, in the absence of a will, to the heirs determined by New York’s intestacy laws. This process can be lengthy and public—a far cry from the direct and private transfer of assets most families expect.
Personal Injury vs. Wrongful Death Claims
New York law makes a crucial distinction between two types of claims that can arise. The first is the personal injury action I’ve described, which seeks compensation for the pain and suffering the deceased person endured before their death. These proceeds belong to the estate.
The second is a wrongful death action. This is a separate claim brought by the estate’s fiduciary on behalf of the surviving family members for the financial losses they have suffered due to the death. Under New York’s Estates, Powers and Trusts Law (EPTL) § 5-4.4, these damages are calculated based on the financial support the decedent would have provided. The proceeds from a wrongful death claim are distributed directly to the qualifying family members and are not considered general assets of the estate. They are not available to the decedent’s creditors.
Disputes can arise over how settlement funds are allocated between these two claims. A proper allocation is critical—it determines who gets the money and whether it is subject to creditor claims. This is not a simple administrative task; it is a point of law that requires careful handling by both the personal injury attorney and the estate’s counsel.
The Power of Intentional Planning
Proactive estate planning is the only way to control what happens to a potential settlement. Relying on the default state rules is rarely the most prudent path. A well-constructed plan ensures you—not a court—decide how these critical assets are managed and distributed.
A will is the most fundamental tool. It allows you to name an executor you trust to manage the lawsuit and specifies exactly who should inherit the net proceeds from the estate. Without a will, a judge in Manhattan or any other county will appoint an administrator, and state law will dictate who your heirs are—they may not be who you would have chosen.
For larger settlements, a trust can provide even greater control and protection. By creating a revocable living trust and making it the beneficiary of your estate, you ensure the settlement proceeds are managed by a trustee of your choosing according to your specific instructions. This is particularly important for protecting a beneficiary who is a minor, has special needs, or is not equipped to handle a large sum of money. A trust keeps the matter private and avoids the direct oversight of the Surrogate’s Court. Stewardship.
The possibility of a personal injury claim is a contingency most people don’t consider in their estate plan. Yet it represents a potentially significant future asset that deserves the same level of deliberate thought as your home or investment portfolio.
If you or a loved one is involved in a personal injury case, the prudent next step is to examine how a potential settlement would be handled by your existing estate plan. Our firm can conduct a review of your current documents to confirm the proceeds will reach the people you intend, without unnecessary delay or exposure to creditors.
