Typically for settlements...
If the payment is for actual damages there are not income taxes. Such as medical expenses, repair of physical damage to a car, etc.
Punitive damages, emotional distress, etc. are taxable.
Lawyers who work on a percentage will take 25-33% of the settlement amount.
So say $5,000,000, that's the 37% tax bracket. That's about $1,800,000 to the government in income taxes. Say 25% for the lawyers, that $1,250,000. So a little over $3,000,000.
That family will get about $2,000,000 and will likely owe income taxes on that.
WW