Estate Planning Law
Lottery winners must address many legal issues at one point or another. Know this: if you win the lottery, it is highly recommended you consult with an attorney before claiming the winning ticket. This will allow you to address the various legal issues professionally and lets winning the lottery be a good thing and a nightmare.
Winning the lottery presents a great opportunity to revisit your estate planning situation. Low-cost do-it-yourself (D.I.Y.) living wills, powers of attorney, and wills are possible in some simple cases and can be found on our companion site, FindLaw.com. You may also want to consult with an estate planning attorney in your area for advice on your individual situation.
Most winners' names are published in the media, which can bring on a loss of privacy that you previously enjoyed.
Some argue that the winners' names should be published so that the public can be assured the state isn't just keeping the money. But others say that the celebrity status created by a lottery win can have negative consequences because of the unwanted publicity.
Depending on the circumstances, you may be able to protect your privacy. Consult with an attorney about how you choose to receive the winnings. For example, there may be legal entities that can be created to help mask your identity. This might help save you from a 15-minutes-of-fame-gone-wild situation.
The law considers lottery winnings taxable income. Whether received as a lump-sum payment or in multiple annual payments, the winnings will be taxed as you receive them.
A trust may be an excellent option to hold the lottery winnings. Some of the tax advantages of a trust may include avoiding probate and minimizing estate taxes for any beneficiaries after you pass away.
Many people buy lottery tickets with pooled funds from family, friends, or colleagues. Splitting the winnings depends on:
If multiple individuals own the winning ticket, a partnership may be a good entity to form. This allows a neutral third party to receive the winnings on behalf of all of the partners. Rather than one individual receiving the checks, a partnership can distribute them fairly.
Lottery money may be considered marital property acquired during the marriage, particularly if the ticket was purchased with marital funds. Lottery winnings may be subject to division upon divorce, so you may want to speak with an asset protection attorney if a divorce is pending.
There may be joint rights to the winnings even if the parties are not married, but they:
A lottery winner can make a gift of some of the lottery winnings. This is legal only up to the annual exclusion limit, or else it will need gift tax liability. Making yearly gifts in this fashion is a good way to share the winnings with family members and friends while mitigating the tax implications.
Gifts made to another person's education or medical care may have favorable tax treatment as well. Finally, donations to charities can have certain attractive tax advantages for the lottery winner.
When a person wins the lottery, the advice and consultation of an experienced estate planning and tax attorney can be a huge advantage when dealing with the various legal and related issues.
Ideally, a lawyer should be consulted before claiming the lottery prize so that the appropriate legal mechanisms can be put in place.