The excitement that comes with winning a big lottery jackpot can turn into a hailstorm of confusion and frustration if the winner dies before claiming the winnings. This can also become a concern if the individual dies after claiming his winnings but before establishing a written document as to whom the funds should be allocated. Here is what you need to know about using a partnership to claim lottery winnings to avoid unwanted complications.
Read the rules. A clear understanding of all state lottery rules and tax ramifications upon winning is an essential part of your participation in the state lottery process. The last thing you want to do is win a large sum only to find out you have signed half of it over to Uncle Sam, when you could have had it dispersed sparingly over 20 years. Make sure you read all regulations and understand how you will be receiving your award if do happen to win.
Establish a group system. It is not uncommon for many individuals to pool their money or entitlements together to buy multiple lottery tickets. This way, a wider range of number combinations can be played and one can benefit from an enhanced probability of a winning return for a much smaller individual wager. At the same time, contracts should be written up as to how the winnings should be spread among the members.
Choose your representative and choose wisely. When one person is chosen as an entity to receive the the lottery winnings on the behalf of an entire group, anyone who might owe the government money in the form of back taxes, unpaid student loans or unpaid child support payments, will have that money taken from the winnings prior to them being awarded, so keep in mind that they might not be a good candidate for partnership.
Have the individual chosen to receive the earnings draft a will and testament in the presence of witnesses and an attorney to make sure all of the winnings will be spread as they were originally intended in case of the chosen representative dies before claiming the winnings.
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As a default, remember that anyone who is married need not write up a contract if his partner in the wager is the spouse, because she is automatically entitled to half of the winnings. This also means if there is a married member in a group of individuals pooling their money to wager together in a lottery, it would be wise to make sure that person is not the representative chosen to claim the winnings, because regardless of contracts written prior to claiming the winnings, they will only be entitled to split half of the winnings among the other members of the group.
References
- IRS. "Instructions for Forms W-2G and 5754 (2020)." Accessed March 27, 2020.
- IRS. "IRS Provides Tax Inflation Adjustments for Tax Year 2020." Accessed March 27, 2020.
- Tax Foundation. "Taxes in New York." Accessed March 27, 2020.
- The Tax Foundation. "State Individual Income Tax Rates and Brackets for 2020." Accessed March 27, 2020.
- Oregon Secretary of State. "Government Finance: Taxes." Accessed March 27, 2020.
- MoneyManagementInternational.org. "How Much Does Winning the Lottery Cost You?" Accessed March 27, 2020.
- IRS. "Topic No. 419 Gambling Income and Losses." Accessed March 27, 2020.
- IRS. "Topic No. 503 Deductible Taxes." Accessed March 27, 2020.
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Writer Bio
Simon Breedon has been freelance writing for Newspapers for the past 8 years. He has written for The Washington Informer, Edge Magazine, The Yeti, The FSView and Florida Flambeau Newspaper. He has a BA from Florida State University in Creative non-fiction/ Journalism and a Masters Certification in Editing and Publishing. He is currently attending Law School and studying for a computers science degree.