First of all, CONGRATULATIONS if you are one of the few to win instant fortune in the state lottery! As soon as you realized you were the winner, you probably were envisioning your dream house, or your vacation in the tropics, the car you’ve always wanted, or the amount of money you’ll give to family. But before you take any steps to actualizing those dreams, you need to take a step back and make sure you’re ready to manage this new wealth. A “lottery trust” is an excellent way to do this—it can take the form of a blind trust, revocable trust, or another legal entity, and it can help avoid problems that will quickly come with such a large amount of money. Here’s an example: some states prohibit winners from remaining anonymous, but a blind trust allows lottery winners to still maintain their privacy.

If you’re a lottery winner, and if you’re wanting to establish a lottery trust, you want to make sure that you do it efficiently and effectively. Manfred Sternberg & Associates has extensive experience in establishing lottery trusts, and this means that we know that each individual lottery winner’s needs and desires will vary. We have the experience and knowledge to form a trust that meets your specific situation, and we urge to allow us to work with you quickly. In general, lottery winners who do choose to form a trust for their winnings need to establish the trust BEFORE claiming the prize.

Also keep in mind that you need to sign and secure your winning ticket immediately. Anyone who holds the ticket can redeem it, so make sure it is safe. Also make sure to be aware of the deadlines for claiming your prize!

When and Why Do I Need a Lottery Trust?

Some winners will not want or need a lottery trust. For example, if you’re married and have already set up a trust in your and your spouse’s name, you don’t need a new trust. You can deposit the winnings into the existing account. That’s a simple solution, but you may want to consider additional requirements of a trust. For example, a bypass trust will automatically name your surviving spouse as the beneficiary at your death, which will help reduce your family’s tax obligations.

No two winners have the same needs, requirements, and desires for their prize money. A good financial planner will make sure to understand and enact your wishes to protect your money and ensure smooth transitions both now and in the future, for you and for your family. But while every person is different, there are some basic factors all winners generally may address when considering a lottery trust. These include, but are not limited to:

  • Do you want to remain anonymous? Some people don’t want to be famous for winning, and they don’t want to deal with the media and harassment for donations that often follows winning the lottery. In the entire U.S., only a few states actually protect the anonymity of lottery winners. But if you put your money into a trust, the name of the trust becomes public, but not your name. This allows for much greater privacy on your part, and on your family’s part, as well.
  • Are you part of a group of winners? Many people – from family members to friends to co-workers – will pool their resources and purchase one number to enter the lottery. However, only one entity can actually claim the prize. Establishing an irrevocable trust in the name of the winners can ensure that the money is distributed fairly.
  • Do you want your money in payments or a lump sum? Deciding how you will receive your winnings has a direct impact on your tax obligations. Here’s an example of avoiding complications through a trust: if a winner decides to receive payments, but dies before all the payments are made, a trust assist in managing those yearly tax bills without leaving a family to figure it out on their own.
  • Are you married? Your lottery winnings will affect your marital property implications. Also, if you get married after you win, you may want to consider a prenuptial agreement that addresses your winnings.

Setting Up a Lottery Trust: Overview

Lottery trusts are managed by an appointed trustee, and while appointing yourself as the trustee is possible, appointing another person allows you to protect your privacy. Trusts also have named beneficiaries, which again may be just yourself, or can be family members. Many lottery winners who want to share their fortune set up a trust for each family member, or set up charitable trusts.

Regardless of what you choose to do with your money, it’s good to know the three kinds of trusts: blind, irrevocable, and revocable.

Blind Trusts

A blind trust means, as the name suggests, that you (and any other beneficiaries) do not “see” the detailed management of the money. You are not involved in the daily management—in fact, you do not even personally claim the prize. You establish the trust and donate your winning ticket to that trust, and the trust claims the ticket it is name. The trust will then invest the funds without your input. This is why it’s vital to appoint someone with experience in investment to oversee the fund. You want to, no pun intended, trust the person or people overseeing your trust fund.

Irrevocable Trusts

An irrevocable trust is generally the best legal entity for a single prize claimed by multiple people. If you pooled together for a ticket with family, friends, or coworkers, and you won, an irrevocable trust ensures the funds will be fairly dispersed to each member of the pool. This is accomplished by avoiding the tax consequences that come with transferring the money to multiple parties, a significant benefit to those involved. As its name suggests, an irrevocable trust cannot be altered or revoked, and therefore it prevents issues and disputes among the parties in the present and future.

Revocable Trusts

A revocable trust, also known as a “living trust,” means that you can establish the trust now, but change its terms later, such as altering whom you include as beneficiaries. Along with shielding your privacy, a revocable trust bypasses probate court when you pass away. This trust simplifies estate planning because the assets in the trust will pass directly to the beneficiaries you have named, and a review by probate court is not required. Also, if your spouse is the beneficiary, the trust can assist with reducing estate taxes, but will not reduce income taxes on the money you win from the lottery.

Talk to a Lawyer about Lottery Trusts TODAY!

So, you win the lottery. Everything inside you wants to celebrate and dream, but take a few deep breaths first and remember how you plan and prepare to secure your winnings is vital. Think about the long-term future, and consider hiring the experienced trust attorneys at Manfred Sternberg & Associates. Let our team help you claim your fortune in confidence that it will last and will bring enjoyment rather than anxiety. Give us a call today!

Claiming a Jackpot Anonymously

Protect Yourself & Your Winnings

Fame often sounds appealing, but lottery winners find that being in the spotlight isn’t as enjoyable as society makes it out to be. In fact, instant fame can be terrifying when it comes from instant wealth. Jackpot winners must immediately think about their and their families’ safety. The media will swarm around winners, invading personal privacy. Charities and people in need will solicit you for help. People you haven’t talked to for years, or that you may not even remember meeting, will ask you for money, from long lost family members to business acquaintances. Once your privacy is lost or compromised, you cannot take it back. That is why we advise specific steps to limit exposure of your win, or to preserve anonymity completely. And these steps must be taken BEFORE you claim your ticket with the Lottery Commission.

It’s not easy to claim your ticket anonymously. As of 2016, only six (6) states allow winners to claim their ticket anonymously: Delaware, Kansas, Maryland, North Dakota, Ohio, and South Carolina. The possibility for anonymity depends on the state where the winning ticket was purchased. The Lottery Commission in certain states will not release the money until they have held a press conference stating the winner, but others are more flexible if the winner does in fact wish to stay anonymous. It’s important to know where your state lies in this spectrum so that you can, once you win, instantly begin the process of protecting yourself and your family.