A wrongful death settlement of compensatory damages is nontaxable because it is the result of a claim arising from personal physical injury or illness. However, if the settlement includes punitive damages and/or interest, that portion of the settlement is taxable.
A retirement plan that meets tax law tests and allows for tax deferment and tax-free accumulation of income until benefits are withdrawn. Pension, profit-sharing, stock bonus, employee stock ownership, and Keogh plans and IRAs may be qualified plans.