John Geer, a kitchen remodeller, died after being shot by Fairfax County Police officer Adam Torres in 2013. Other officers and witnesses said the 46-year-old had his hands up when he was shot.
Torres was one of the officers who responded to a complaint from Geer's common-law wife, Maura Harrington, who told a 911 operator Geer was tossing her possessions out of the house.
Rodney Barnes, a negotiator who was trying to coax Geer out of the house, later told investigators looking into the shooting that the man's hands were raised when the shot was fired. Other officers, excluding Torres, also said Geer's hands were raised, as did other witnesses.
Torres said he saw Geer move his hands down towards his waist.
No one has been charged in connection with the case.
The shooting is still going through a police administrative review, as well as state and federal criminal investigations, Fairfax County said in a release announcing the settlement.
Michael Lieberman, a lawyer for Geer's family, said the money will go to Geer's daughters.
"One of John's big aspirations was that his daughters be able to go to college and graduate debt free. This will at least allow that to be accomplished," said Lieberman, who added that the family hopes to see the case go before a grand jury.
Fairfax County board of supervisors chair Sharon Bulova said in a statement that she was pleased "a fair settlement has been reached and I hope this may bring some measure of closure to the family of John Geer."