Winning the lottery often means stepping into a cache of legal conundrums that can cost you a lot of time and money in court. That's where planning ahead can pay off.
The most common legal issues involve disputes over office lottery pools and ownership of winning tickets. But there are other potential problems too.
Here are our Top 5 legal tips for winning the lottery:
- Make sure the lottery and your lottery pool are legal. Some states like Utah prohibit all games of chance, including lotteries and office lottery pools. This may apply even if you cross state lines to buy a ticket. Workplace rules, like those for federal employees, may also bar lottery pools, so check with your HR manager to be safe.
- Get prize-splitting agreements in writing. Many lottery-ticket court battles focus on how lotto pools are supposed to split their winnings. The best way to avoid this is with a written agreement, as an oral agreement to split a potentially large pot of money may not be enforceable.
- Buy your ticket when witnesses are around. Witnesses and even store surveillance video can help settle disputes about a winning lottery ticket's legal ownership. This happened recently in a Georgia case, in which surveillance video was used to show an undocumented immigrant was actually the rightful owner of a disputed ticket.
- Consider the claim deadline. State laws determine how long a lotto winner has to claim her prize, even for multistate lottery games like Mega Millions and Powerball. Generally, winning tickets must be claimed within 90 days to 1 year of the prize drawing, according to Powerball.
- Pay your taxes. In general, the IRS counts lottery winnings as taxable income that must be reported. Prize checks subject to federal withholding tax will come with a W-2G form to show how much tax was withheld. Many states also impose a state withholding tax ranging from 3% to 10%, according to the Tax Foundation.
Other legal issues can emerge when you win the lottery, such as concerns about privacy -- not to mention long-lost relatives and friends who may try to cash in on your good fortune. You'll probably want to consult an experienced local attorney to protect your assets -- after all, you'll be able to afford it.
- 10 Things To Do When You Win The Lottery (Forbes)
- State Gambling & Lottery Law (FindLaw)
- NJ Man Must Share Mega Millions Jackpot With Co-Workers (FindLaw's Decided)
- MegaMillions Jackpot All Mine, MD Woman Claims (FindLaw's Law and Daily Life)