Practically, it’s hard to find the monetary value of pain and suffering from an accident. Because only the person knows how much s/he is suffering. Let’s know how much is pain and suffering worth in Canada.
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What is Pain and Suffering in an Accident?
Any substantial physical and mental suffering caused by an accident is considered pain and suffering. It can be any bodily injury such as breaks and tears, fractures or even severe injury caused by accident. Similarly, a traumatic brain injury (TBI) that might affect you in the long run, is considered pain and suffering.
So after an accident, the victim can file a claim against the at-fault party. When the court judges the case, they will consider all the pain and suffering from the accident when offering compensation.
If you face any such circumstances, be mindful of your rights and consult a personal injury lawyer in Calgary.
What Is Considered Pain and Suffering in an Accident?
An accident may include several injuries and damages. Apart from bodily injuries, the person might also have post-traumatic stress disorder (PTSD). Even the accident can cause you financial loss, which leads to mental stress.
While physical injuries are visible and easy to measure, mental stress might difficult to detect. According to Mayo Clinic, PTSD may also include:
- Trouble in sleeping
- Anxiety about riding a vehicle or driving
- Feeling uneasy or getting irritated while driving
- Recurring memories of the accident
How Much is Pain and Suffering Worth in Canada?
In Canada, the maximum pain and suffering compensation is currently $350,000.
Canadian Supreme Court delivered three rulings in 1978 (together known as “The Trilogy”) limiting the amount of compensation a plaintiff may receive as non-pecuniary pain and suffering damages.Â
The Supreme Court concluded in The Trilogy that the maximum amount of pain and suffering compensation should be $100,000.
Do You Need to Pay Income Tax on Your Settlement?
One of the most frequently asked questions from people receiving a settlement for personal injury is if the money they receive for pain and suffering is taxable or not. Moreover, does the taxman receive a cut?
Pain and Suffering and Income Tax
No, it is the quickest response. The Canadian Revenue Agency does not consider pain and suffering awards taxable income. Plaintiffs are not required to pay taxes for non-pecuniary damages, whether settled out of court or awarded by a judge or jury.
Similarly, any compensation for hospital fees, prescriptions, or interest earned from the award within the end date provided by the court ruling is tax-free.
Only taxable income is subject to income tax. Pain and suffering compensation is not considered income. It is a sum of money set aside to compensate for your incurred loss.Â
The Compensation is Taxable When Invested
The gain is taxable if you invest the compensation for pain and suffering for interest or profit. Assuming you’ve been granted $100,000 in non-monetary damages for “pain and suffering.”Â
If you invest $100,000 in equities and earn 5% annually, the taxable amount is the $5,000 earned.
Non-taxable Structured Settlements
Some people choose a structured annuity for a lump-sum settlement to avoid paying taxes. It is called a structured settlement. An annuity is a contract that allows you to receive payments over a set time. All payments are tax-free, including interest.
A lump-sum sum payoff under a structured annuity must meet the following criteria:
- The award must relate to a personal injury or death.
- The insurer must acquire:
- a non-transferable (meaning the payment can’t be transferred to someone else)
- non-commutable (meaning you can’t alter the periodic payments back to a lump amount)
- non-assignable (meaning the contract can’t be assigned to a third party) annuity contract.
- The insurer must continue to be liable for making payments following the settlement agreement.
Conclusion
Hopefully, you now have a clear understanding of the limit and the regulations placed on pain and suffering damages in Canada. To get the best possible compensation for your pain and suffering damages, consult an experienced lawyer as early in the stage as possible.