For Lottery Winners, a Trust Can Really Pay Off
Lottery hopefuls may be elated with the idea of hitting the jackpot, but a trust can really keep those potential winnings from becoming "easy come, easy go."
The Mega Millions jackpot for Friday's drawing is an estimated $291 million, while the Powerball jackpot is nearing $100 million, reports Philly.com.
The lucky winners of either game will need a way to protect their prize money, and for that, a lottery trust is the legal way to go.
What Is a Lottery Trust?
Trusts are a fantastically useful investment tool. Often, persons use a living trust as an alternative to a will, as a way for property to avoid going through the probate process when they die.
A trust creator (settlor) designates both a trustee (or trustees) to run the trust as well as beneficiaries who receive the benefit of property held by the trust.
Lottery trusts are essentially a living trust where the settlor is a lottery winner, and the assets he or she places within the trust are the lottery winnings. The winner can then assign an attorney or financial institution as trustee and designate the winner and any loved ones as beneficiaries.
Using a lottery trust, the trustee will now be bound by the trust agreement to use the lottery winnings to act in the best interests of the beneficiaries (i.e., the winner and friends/family). This may prevent the money from being swallowed up by frivolous spending or even substance abuse.
Trust Protects Privacy, Prevents Fighting
A blind trust -- as opposed to a revocable trust -- gives complete control over the trust assets to the trustee(s) and gives the beneficiaries no knowledge of the trust's holdings or how the money is doled out.
For example, a lottery blind trust agreement might have the trust deposit $5,000 in the winner's bank account every two weeks for the rest of the winner's life. Family members and friends can be set up with similar arrangements in the trust agreement as beneficiaries, and they will have no control over how much money they receive or knowledge of how much is in the trust.
Once a trust is created, depending on state laws about publicizing lottery winners, a trustee can then claim the lottery winnings on behalf of the trust, which in some states may keep the winner entirely anonymous.
If you're worried about protecting your future lottery winnings, contact an experienced trusts attorney to discuss your options.
Related Resources:
- 19 Lottery Winners Who Blew It All (Business Insider)
- 5 Winning Ways to Make a Powerball Jackpot Last (FindLaw's Law and Daily Life)
- If You Win Powerball Jackpot, IRS Wins Too (FindLaw's Law and Daily Life)
- Drafting a Living Trust? 3 Questions to Answer (FindLaw's Law and Daily Life)