Imagine you play the lottery and finally hit it BIG! The Texas Lottery announced last week that a Fort Worth man won the “Instant Millionaire” scratch off ticket worth a whopping $2.5 million.
The winner has chosen to remain anonymous under HB 59 authorizing the winners of certain lottery prizes over $1 million or more to remain unnamed.
Speak with a qualified estate planning attorney BEFORE collecting the winnings. The following estate planning options can assist in reducing taxes, keeping the winnings private, and protecting your assets:
Setting up a Trust
Taxes: A trust can hold the winnings to minimize taxes.
Privacy After Death: If you are also worried about keeping your winnings and assets private, creating a Revocable Trust can assist with privacy upon your death. If you have a Will when you die, the Will goes through the probate process and is made public. However, utilizing a Revocable Trust will keep your assets and your beneficiaries completely private.
Community Property, Seperate Property, and Divorce
Texas is a community property state. That means that anything that was purchased with marital funds or acquired during the marriage is considered community property. This includes lottery winnings. If a lottery winner later gets a divorce, the winnings could potentially be divided between spouses. Speak with an attorney before collecting your winnings in order to discuss your options.
Making Annual Gifts
To reduce the amount of taxes paid on the winnings, you have the option to gift money to family and friends. The 2020 Annual Gift Tax Exclusion amount is $15,000. That means that you may gift up to $15,000 per year to a person or charity free of tax. This would be helpful if you plan to leave a lump sum of money to family members or a friend upon your death. To assist in minimizing taxes, you have the option to gift it to them now.
Receiving a Lump Sum or Annual Payments
Upon winning the lottery, you have the option to choose how you collect the winnings by either receiving the total amount at once or getting a series of payments over an extended period of time. If you choose to collect the lump sum, you can take advantage of HB 59 and remain anonymous. However, if you choose to receive the installment payments, your information will become public in 30 days after claiming the winnings.
There are many options to consider if you happen to be the lucky winner. Remember to consult with a qualified estate planning attorney and don’t forget to CELEBRATE!
Do you need the assistance of an Estate Planning Attorney in Dallas, Texas?
Call our office at 214-559-7202 or Contact Us online to schedule a no charge consultation today.