Imputing Income for the Deceased in Arizona Wrongful Death Calculations

TL;DR

In Arizona wrongful death cases, “imputing income” is a method used by forensic economists to assign a probable earning capacity to a deceased person who had no recent work history, was a student, a homemaker, or was underemployed. This process involves analyzing factors like the deceased’s age, education, skills, health, and local economic data to project what they could have earned over their expected work-life. This projection then becomes a crucial basis for calculating the total financial loss suffered by the surviving family members.

Key Highlights

Imputed income is a projection of potential earnings, not a record of actual past wages.
This method is essential for cases involving students, homemakers, unemployed, or underemployed individuals.
Arizona law, specifically A.R.S. § 12-613, allows for damages based on the loss of future earning capacity.
Forensic economists use data on education, age, health, and market conditions to build a credible projection.
The ultimate goal is to establish a fair and reasonable value for the deceased’s lost economic contributions to their family.

When a family in Arizona loses a loved one due to another’s negligence, the law provides a way to seek financial compensation through a wrongful death claim. The Arizona Wrongful Death Act, outlined in Arizona Revised Statutes (A.R.S.) § 12-611 et seq., allows specific surviving family members, known as statutory beneficiaries, to recover damages for the losses they have endured. These claims are not meant to place a value on a human life but to quantify the financial and emotional voids left behind.

A significant part of any wrongful death calculation is determining the financial support the deceased would have provided to their family over their lifetime. For a person with a long and stable career, this calculation can be relatively straightforward, based on tax returns, pay stubs, and predictable career advancement. However, the situation becomes far more complex when the deceased was a college student on the verge of a career, a dedicated stay-at-home parent whose work was unpaid, or an individual temporarily between jobs. In these instances, there is no simple earnings record to consult.

This is where the economic principle of imputing income becomes essential. Arizona courts recognize that a person’s value is not limited to their last paycheck. Their potential to earn, known as “earning capacity,” is a tangible asset that has been lost. The process of imputing income uses established economic methodologies and statistical data to build a logical and defensible projection of that lost capacity. This ensures that families receive compensation that truly reflects the full scope of their financial injury, preventing a situation where the loss of a future high-earner or a valuable homemaker is unfairly minimized.

What is Imputed Income and Why is it Necessary in Arizona Wrongful Death Claims?

Understanding the concept of imputed income begins with recognizing the difference between what a person was earning and what they could have earned. In the context of a wrongful death claim, this distinction is critical for achieving a just financial outcome for the surviving family.

Defining “Imputed Income” vs. “Actual Earnings”

The terms may sound similar, but they represent two very different financial pictures.

Actual Earnings: This refers to the documented income a person was receiving at the time of their death. It is proven with concrete evidence like W-2 forms, 1099s, tax returns, and pay stubs. For someone with a steady job, this forms the baseline for calculating lost income.
Imputed Income: This is a projected, or assigned, income level for an individual who was not earning to their full potential or was not in the workforce. It is an economic construct based on a person’s inherent ability to generate income, known as their earning capacity. Imputed income is not based on past paychecks but on a comprehensive analysis of the individual’s attributes and relevant economic data.

The legal system in Arizona allows for the use of imputed income because it acknowledges a fundamental truth: a person’s economic value to their family is not frozen at the moment of their death. A 22-year-old medical student has an enormous earning capacity that is not reflected in their part-time job history. A 35-year-old stay-at-home parent provides services worth tens of thousands of dollars annually, even without a traditional salary. Imputing income bridges this gap between a person’s current financial snapshot and their lifelong economic potential.

The Legal Foundation in Arizona: A.R.S. § 12-613

The basis for these calculations is rooted in state law. A.R.S. § 12-613 states that in a wrongful death action, the jury shall award “such damages as it deems fair and just with reference to the injury resulting from the death to the surviving parties who may be entitled to recover.”

Arizona courts have consistently interpreted this “fair and just” standard to include the loss of the deceased’s future earning capacity. This interpretation is vital. It means the law is not just concerned with replacing a lost paycheck; it is concerned with compensating the family for the loss of the deceased’s ability to provide for them in the future. This legal precedent gives attorneys and economic experts the foundation they need to present a case based on imputed income, provided it is supported by credible evidence and sound methodology.

Scenarios Requiring Income Imputation

Imputing income is not necessary in every case, but it is indispensable in several common scenarios. Without this tool, families in these situations would be left with little to no recourse for their economic losses.

Deceased was a student: A high school, college, or graduate student often has little to no income history. Their earning capacity is based on their field of study, academic performance, and the projected career path they were on.
Deceased was a stay-at-home parent or homemaker: This individual provided immense economic value through unpaid labor. Imputing income involves calculating the market cost to replace the services they provided, such as childcare, cooking, cleaning, and household management.
Deceased was unemployed or between jobs: A person may have been temporarily laid off or actively seeking new employment. Their earning capacity is not zero; it is based on their prior work history, skills, education, and the job market for their profession in Arizona.
Deceased was underemployed: An individual might have been working in a job below their skill or education level, perhaps while pursuing further education or for personal reasons. Their earning capacity would be based on what they could have earned in a job commensurate with their qualifications.
Deceased was a child: This is the most challenging scenario, but it is still possible to project a loss. The calculation often relies on statistical averages and factors like the parents’ educational and professional backgrounds.

The Role of the Forensic Economist in Projecting Lost Earnings

Calculating imputed income is not guesswork. It is a sophisticated process handled by a specialized expert known as a forensic economist. This professional plays a pivotal role in a wrongful death case by translating a life’s potential into a clear, defensible financial figure.

Who is a Forensic Economist?

A forensic economist is an expert in applying economic theories and statistical methods to legal matters. They typically hold advanced degrees in economics, finance, or a related field and have extensive experience in analyzing financial data to calculate damages in litigation. In a wrongful death claim, their job is to serve as an objective expert witness who can explain complex financial concepts to a judge and jury in an understandable way. They are not advocates for the family; rather, they are experts who provide an impartial opinion based on evidence and established methodologies.

The Data-Driven Process of Calculation

A forensic economist’s work is meticulous and evidence-based. They do not invent numbers; they build a financial model from the ground up using a wide range of data points. The process generally involves several key steps:

Gathering Personal Data: The first step is to learn everything possible about the deceased. This involves collecting and analyzing:
- Age and Health: The deceased’s age at the time of death and their general health condition are used to determine their life expectancy and work-life expectancy.
- Education: This includes high school transcripts, college degrees, vocational certifications, and any specialized training. For students, GPA and field of study are critical.
- Skills and Work History: Even if the deceased was unemployed, their resume, past job descriptions, and performance reviews provide insight into their skills and professional level.
- Personal Habits: Factors that could impact work-life, such as a smoking history, are also considered as they can affect statistical life expectancy tables.
Analyzing Statistical and Economic Data: The economist then combines the personal information with broad, reliable datasets to create a projection. This includes:
- Government Data: The U.S. Bureau of Labor Statistics (BLS) and the U.S. Census Bureau provide a wealth of information on wages by occupation, education level, age, and geographic location. The economist can use this to find what a person with the deceased’s profile would likely earn in the Arizona job market.
- Work-Life Expectancy Tables: These statistical tables, different from general life expectancy tables, estimate how many more years a person of a certain age, education, and gender would likely have remained in the workforce.
- Economic Trends: The expert considers factors like projected inflation rates and wage growth for specific industries to ensure the projection is realistic over time.

Presenting the Findings in Court

The culmination of this work is a comprehensive written report that details every assumption, data source, and calculation. This report forms the basis of the economic damages claim. If the case proceeds to trial, the forensic economist will take the stand as an expert witness. They will explain their methodology, present their conclusions, and use charts and graphs to illustrate the projected financial loss. They must also be prepared to defend their analysis under cross-examination from the defense attorneys, who will almost certainly challenge their assumptions and conclusions.

Key Factors Used to Impute Income for Different Individuals

The methodology for imputing income is not one-size-fits-all. A forensic economist tailors their approach based on the specific circumstances of the deceased. The analysis for a law student is vastly different from the analysis for a stay-at-home parent.

Imputing Income for a Deceased Student

When the deceased was a student, the focus shifts from past performance to future potential. The economist builds a case for what the student’s career would have looked like.

Field of Study and Performance: The student’s major is a primary indicator. An engineering student in their final year at Arizona State University has a clearer and typically higher earnings trajectory than a freshman with an undeclared major. Academic records, GPA, and letters of recommendation are used to establish diligence and aptitude.
Statistical Averages: The economist will use BLS data to determine the average starting salary and mid-career salary for individuals with that specific degree in the Phoenix or Tucson metropolitan areas. For example, they can project the income of a nursing student based on what registered nurses with a bachelor’s degree earn in Arizona.
Personal Ambitions: Evidence of the student’s goals, such as applications to graduate school or internships in a specific field, can help support a projection for a higher-than-average career path.

Valuing the Contributions of a Homemaker or Stay-at-Home Parent

The economic loss from the death of a homemaker is profound, and Arizona law allows for its recovery. The analysis here uses a “replacement cost” methodology. The expert identifies the many services the homemaker provided and calculates what it would cost to hire professionals to perform those same tasks.

The list of services is often extensive and can include:

Childcare provider or nanny
Private tutor for school-aged children
Household manager and bookkeeper
Professional cook or chef
Cleaning service or housekeeper
Chauffeur for transporting family members
Errand runner (grocery shopping, etc.)

The forensic economist uses local market data to assign an hourly wage to each of these roles. By estimating the number of hours the homemaker spent on these tasks each week, they can calculate an annual imputed income. This figure often amounts to a significant sum, demonstrating the tangible financial value of their unpaid labor.

Projecting Earnings for an Unemployed or Underemployed Person

For someone who was out of work or working below their capacity, the economist looks to their established potential.

Prior Work History: The individual’s previous jobs, salaries, and responsibilities are the strongest evidence of their earning capacity. The analysis assumes they would have found a similar position within a reasonable timeframe.
Education and Skills: A person with a master’s degree and 15 years of experience in project management who was working a retail job to make ends meet has a much higher earning capacity than the retail job suggests. The imputed income would be based on what project managers with their experience earn in Arizona.
Job Market Conditions: The economist will analyze the local job market for the deceased’s profession at the time of their death to show that opportunities were available.

The Difficult Calculation for a Deceased Child

Calculating the lost income of a young child is the most speculative but is still permitted in Arizona. The approach relies heavily on statistical averages and parental background.

Parental Proxy: The educational and professional achievements of the parents are often used as a primary indicator of the child’s likely future. It is assumed, for statistical purposes, that a child is likely to achieve a similar level of education as their parents.
Statistical Models: The economist may present a few scenarios. For example, they might calculate the average lifetime earnings for a high school graduate, a college graduate, and someone with a postgraduate degree in Arizona. The jury would then consider these figures in light of the family’s background to determine a fair amount. This approach provides a logical framework for what is an emotionally difficult but legally necessary calculation.

From Gross Earnings to Net Loss: The Necessary Adjustments

Determining the imputed gross annual income is only the starting point. A forensic economist must make several critical adjustments to arrive at the final figure that represents the actual net financial loss to the survivors. The defense will heavily scrutinize these deductions, making their accuracy paramount.

Work-Life Expectancy vs. Life Expectancy

A common mistake is to assume a person would have worked until the day they died. In reality, people retire.

Life Expectancy: This is a statistical measure of how long a person of a certain age, gender, and health status is expected to live.
Work-Life Expectancy: This is a more specific measure of how many more years a person is expected to remain in the labor force. It accounts for retirement. For example, a 40-year-old might have a life expectancy of another 42 years (to age 82) but a work-life expectancy of only 25 years (to a retirement age of 65). The lost earnings calculation is based on the shorter work-life expectancy.

Deducting Personal Consumption

Not every dollar a person earns goes to their family. A portion is spent on their own needs, such as food, clothing, transportation, and personal care. Since the deceased is no longer present, these expenses are no longer incurred. Therefore, this amount must be deducted from the projected gross earnings because it does not represent a loss to the survivors.

The personal consumption deduction is typically calculated as a percentage of after-tax income. The percentage varies based on the person’s family situation. For instance:

A single person might consume 30-40% of their own income.
A married person in a two-person household might consume 25-30%.
A parent with children might consume a smaller percentage, around 20-25%, as more income is directed toward the family unit.

Forensic economists use established economic studies and tables to determine an appropriate percentage for the deduction.

Accounting for Taxes and Present Value

Two final adjustments are required to make the final number accurate.

Taxes: The damage award is intended to replace the net income the family would have received. Therefore, all projected gross earnings must be reduced by the estimated federal, state, and local income taxes the deceased would have paid.
Reduction to Present Value: A wrongful death award for lost future earnings is paid as a single lump sum today, not as a series of paychecks over 20 or 30 years. A dollar today is worth more than a dollar in the future because it can be invested and earn interest. Therefore, the total future stream of lost net income must be discounted to its “present value.” The forensic economist uses a specific, low-risk discount rate (like the interest rate on U.S. Treasury bonds) to calculate how much money would be needed today, if invested wisely, to generate the stream of income that the family has lost.

Common Challenges and Defenses to Imputed Income Claims

When a wrongful death claim relies on imputed income, the defense will almost always mount a vigorous challenge. Their goal is to reduce the value of the claim by attacking the projections as being unrealistic or unfounded.

The “Speculation” Argument

The most common defense is that the entire projection is “pure speculation.” The defense attorney will argue that there is no guarantee the deceased would have achieved the projected career path. They might say a student could have dropped out, a homemaker might have never re-entered the workforce, or an unemployed person might have remained unemployed.

A strong claim counters this argument with solid evidence. The more data-driven and logical the forensic economist’s report is, the harder it is to dismiss as mere speculation. The key is to show that the assumptions are reasonable and based on statistical probabilities and the deceased’s demonstrated history and potential.

Challenging the Expert’s Assumptions

Defense attorneys and their own economic experts will dissect every assumption made by the plaintiff’s economist. They will look for any weak points to exploit. Common challenges include:

For a student: “The student’s GPA was only average; it is unlikely they would have secured a top-tier job in their field.”
For a homemaker: “There is no evidence the deceased ever intended to return to the paid workforce, so imputing a market salary is inappropriate.”
For an unemployed person: “The deceased had a history of changing jobs frequently, so a stable, long-term career projection is unrealistic.”
For any individual: “The deceased had pre-existing health conditions that would have shortened their work-life expectancy.”

The Importance of Credible Evidence

To withstand these challenges, the wrongful death claim must be built on a foundation of credible evidence that supports the economist’s projections. This goes beyond just statistics. It includes qualitative evidence that paints a picture of the deceased’s character, drive, and potential. This can include:

Academic records and awards.
Testimony from professors, mentors, or former employers.
Job applications or business plans created by the deceased.
Personal journals or communications showing their career ambitions.
Evidence of their strong family commitment (for homemaker claims).

The more concrete the evidence, the more likely a jury is to accept the imputed income calculation as a fair and just representation of the family’s loss.

The Broader Picture: How Imputed Income Fits into Total Wrongful Death Damages

The calculation of lost earning capacity, whether through actual or imputed income, is a major component of a wrongful death claim, but it is not the only one. It is important to understand how this economic piece fits into the total compensation available to a family under Arizona law.

Economic vs. Non-Economic Damages

Wrongful death damages are typically separated into two categories.

Economic Damages: These are the quantifiable financial losses the family has suffered. Lost earning capacity is the largest part of this, but it can also include the loss of benefits (like health insurance or retirement contributions) and the medical and funeral expenses incurred.
Non-Economic Damages: These are intangible losses that do not have a precise price tag but are just as real. A.R.S. § 12-613 specifically allows the jury to award damages for the survivors’ “sorrow, grief, mental suffering, and loss of love, companionship, comfort, and guidance.” For a child who has lost a parent, or a spouse who has lost their partner, these non-economic damages can be substantial.

Unlike some states, Arizona does not place a cap on the amount of non-economic damages that can be awarded.

Who Receives the Compensation? (Statutory Beneficiaries)

It is important to remember that a wrongful death claim is brought on behalf of the survivors, not the deceased’s estate. A.R.S. § 12-612 specifies who is entitled to recover damages. The primary beneficiaries are the surviving spouse, children, and parents of the deceased. The compensation is intended to help them cope with the financial and emotional void created by their loved one’s absence.

Why a Thorough Calculation Matters for a Fair Settlement

Most wrongful death cases are resolved through a settlement with an insurance company rather than a trial. A thorough, well-documented, and defensible imputed income report from a forensic economist is one of the most powerful tools in settlement negotiations. It shows the insurance company that the plaintiff’s arizona wrongful death attorney is prepared to prove the full extent of the family’s financial loss in court. An incomplete or poorly supported economic analysis can lead to a low settlement offer that does not adequately provide for the family’s future needs. A meticulously prepared claim ensures that the family is in the strongest possible position to achieve a fair and just resolution.

Conclusion

In Arizona wrongful death claims, imputing income is a critical and complex process for ensuring that surviving families are fairly compensated, especially when their loved one was not a traditional wage earner. It is a data-driven method that moves beyond a simple review of past paychecks to capture the true economic value of a person’s lost potential. By using forensic economists, attorneys can build a powerful case that demonstrates the financial contributions a student, homemaker, or unemployed individual would have made to their family over a lifetime.

This process involves a detailed analysis of personal factors like education and health, combined with broad statistical data on wages and work-life expectancy. After establishing a gross earnings figure, crucial adjustments for personal consumption, taxes, and present value are made to arrive at the net loss to the survivors. This figure, representing the economic damages, stands alongside the non-economic damages for grief and loss of companionship to form the total value of the claim. Understanding that a value can be placed on the future contributions of any loved one, regardless of their employment status at the time of death, is the first step toward financial recovery.

Calculating these complex damages requires specialized legal and economic expertise. The arguments are detailed, and the opposition from insurance companies can be intense. If your family is facing this difficult situation, seeking guidance from an Arizona wrongful death attorney who works with experienced forensic economists is a critical step toward securing the financial stability you deserve. Contact a legal professional to understand your specific rights and the full value of your claim. Contact us for free evaluation today.