Although personal injury settlements usually are not consider taxable, your question is best answered by a CPA, not a lawyer. Sorry...
I assume you mean "settlement" in terms of money you inherited, not from a wrongful death claim. There are certain tax time bombs that can be passed to heirs. In my Financial & Estate Planning practice, this is something that I account for with my clients. I would like to know the details of your inheritance before I offer any suggestions as to how to go forward. You are invited to contact me by email or phone.
Reach me at email@example.com, (877) 411-3462, or (954) 900-2939. Do you know the consequences of your legal situation on your Financial & Estate Plan? I run a Florida law practice and a nationwide financial planning practice (411 Financial) in which I mostly work with people/families who have recently undergone a legal claim like personal injury, divorce, wrongful termination, etc. I find that money without purpose finds a way of getting spent; so I work with my clients to make sure that they have something to show for all of their troubles well after their legal claims are resolved. Securities and investment advisory services are offered through Brokers International Financial Services, LLC, member FINRA/SIPC, Panora, Iowa, Brokers International Financial Services, LLC is not affiliated with 411 Financial, 411 LegalDox, or 411 FlaLaw. Disclaimer: The response above is not legal advice and does not create an attorney/client relationship. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, would significantly alter the above response.
since you didn't identify the source of the inheritance coming from a retirement plan IRA or any other source its possible you owe the IRS moneys from delayed income tax with penalties and interest. it would require a review of how you inherited the funds and the IRS lien letter to determine whether you owe the IRS money. ordinarily you wouldn't owe inheritance tax however you could owe money for deferred income taxes stemming from a retirement plan such as an IRA. see a lawyer or CPA
without a detailed review by a lawyer can all the issues raised in your question be appropriately addressed...nothing in this response should be construed as establishing a lawyer client relationship..the answers herein are for informational purposes and not to be construed as advice