The thrill of winning the lottery is like nothing else. Dreaming of buying whatever you wish, feeling relief that your financial worries are over, and delighting in caring for your family and friends – lottery winners float on cloud nine. Without proper legal and financial planning and advice, you can quickly come crashing down from that cloud.
What do you need to do to protect yourself after winning the lottery? People may come crawling out of the woodwork to take advantage of you, defraud you, or guilt-trip you into giving your money away. A savvy financial planner and skilled estate planning attorney can help protect you from these people and protect you from yourself!
How Can an Estate Planning Lawyer Help Me after Winning the Lottery?
Your legal protections can start even before you collect your winnings. To reduce the chances of scams, theft, or even your own reckless spending, we suggest you consult an experienced estate planning attorney before collecting your winnings. Why? Your lawyer can help protect your new assets, keep your good fortune private, and help reduce your tax obligations.
Consider a Trust For Your Lottery Winnings
A trust may help minimize estate tax that your estate may pay for lottery winnings. A Revocable Living Trust enables you to still benefit financially from your winnings while keeping the exact details of your finances private.
The trust may also be exempt from certain types of taxes.
Consider the Effect of Winning the Lottery On Your Marriage
If you’re married, your spouse may be excited about your luck. However, even if divorce isn’t on the horizon for you, you never know what could happen in the future. As Texas is a community property state, your winnings may be divided with your spouse if you split. Talk to a lawyer before you collect your winnings to see what you can do to protect yourself in the event of a divorce.
Gifting to Family and Friends
You can reduce your tax burden by making annual gifts to friends, family, and others. Each year, the IRS sets an Annual Gift Tax Exclusion (in the most recent year, the exclusion was $18,000). You may gift up to that amount each year per person or per charity. So, if you want to help out friends and family or donate to a cause close to your heart, you may gift them each up to the annual maximum per year.
Gifting these funds before you pass away can reduce the taxes your beneficiaries have to pay.
How Will You Receive Your Winnings?
Depending on the amount you win, you may have the option to collect your windfall in a lump sum or in regular annual payments.
Getting your winnings in a lump sum makes you eligible for protections under HB 59, which means you can remain anonymous. However, if you choose to have annual payments, then 30 days after you claim your winnings, your identity will be made public, including the amount of your prize.
Working With an Estate Planning Law Firm After Winning the Lottery
You have many considerations after winning the lottery. An estate planning lawyer can explain the tax implications for your winnings and recommend setting up legal protections to help you manage your money. Protect your winnings and provide a steady income for the rest of your life.
Don’t collect your winnings without a plan. Contact an estate planning law firm to have a lawyer give you bespoke advice and protect your interests against the government and predatory scammers.