How to Create a Lottery Trust to Collect Your Jackpot Winnings
70 percent of lottery winners end up growing broke. How does someone go from winning millions to nothing? Bad decisions, poor planning, an inability to say “no” to handouts, and limited financial management skills are usually to blame. Manfred Law in Houston, TX offers advice on how to set up a lottery trust to protect winnings and manage newfound wealth.
3 Steps to Creating a Lottery Trust
Claiming a lottery jackpot is not just a matter of presenting a ticket and taking home a check. It takes careful planning to ensure the money is handled responsibly.
Step 1: Be Smart About Claiming Your Winnings
Financial experts recommend that you stay anonymous as long as possible. The minute you step forward, your life will change.
The press will show up, followed by long-lost family members and “friends” looking for their share. No doubt there will also be swindlers offering investment opportunities designed to separate you from your money.
Of the states that run Powerball games, only 6 (DE, KS, MD, ND, OH, SC) allow anonymity. Three will allow anonymity if the money is claimed through a trust or limited liability company (LLC). The other states require you to give your name, where you live, and the location where you bought the ticket.
Step 2: Consult an Attorney
Actually, this should be Step 1. Before doing anything, consult with an attorney specializing in gaming law and estate planning. He or she will be able to offer advice on the best way to claim lottery winnings, how to set up a revocable trust for lottery winnings, and discuss your tax options.
(Remember the IRS will claim a big chunk of your jackpot, too, as will states that have an income tax.)
Step 3: Set Up A Revocable Trust
A revocable trust (aka a “living trust”) is created in order to protect or hold ownership of assets, which can include lottery jackpots. According to The Balance, the “grantor” is able to control and manage the money as the trustee.
A revocable trust remains in effect while you’re still living. It also set provisions for what happens to the money if you become incapacitated, as well as for how the money should be distributed after your death.
As the trustee, you retain full control of the money and can withdraw funds as needed. Your spouse can be named as a primary beneficiary and your children and/or grandchildren as successor beneficiaries.
Advantages of a Revocable Trust
There are several advantages of a revocable trust for lottery winners. Because a revocable trust can be managed while you’re alive, you are free to change or add anything down the road. You can add other assets like real estate, stocks, and bonds. You could also set up life insurance policies or transfer some funds to an irrevocable trust to protect your beneficiaries from creditors after your death.
You are also free to change your beneficiaries at any time.
Seek Legal Advice For Your Lottery Winnings
If you do become that lucky, one-in-a-million lottery winner, you will need sound legal advice from an attorney with experience in gaming laws and estate planning. A lottery trust can help protect your newfound wealth so that generations to come are able to reap the benefits. Manfred Law in Houston, TX can help you with lottery winnings and a variety of legal needs. Contact us today for a free consultation.