can a trust claim a lottery prize

How To Remain Anonymous If You Win The $1.5 Billion Powerball Lottery

If you think the odds of winning this week’s record breaking $1.5 billion Powerball lottery were low (1 in 292 million), try remaining anonymous if you win! The Multi-State Lottery Association, which runs the Powerball Lottery, explicitly states that there are only five states in which you have the legal right to remain anonymous. If you don’t buy the winning ticket in one of those states, are you out of luck? Not necessarily. Here is an excerpt from my new book, The Sudden Wealth Solution: 12 Principles to Transform Sudden Wealth Into Lasting Wealth.

Gallery: 10 Steps To Take When You Win A Lottery Jackpot

If you want to remain anonymous but didn’t purchase the winning ticket in one of those states, it makes the job harder, but there are strategies and legal entities you can create that will help you remain more private if you win the lottery. There are two different strategies. The first is using a “blind” trust.

Remaining Anonymous After Winning the Lottery: Using a Blind Trust

There are a lot of misconceptions and potential problems with blind trusts. Federal officeholders, such as senators or governors, are required to either fully disclose all their financial holdings and any possible conflicts of interest, or place their holdings in a blind trust with a financial institution as the trustee. To prevent the perception that they are voting on legislation from which they could personally benefit, their assets are managed independently and by a third party, without their knowledge or control (i.e., the politician is blind to their investments). But you’re not a politician and you don’t want to give up control of your assets to someone else.

Recently, the term blind trust has grown to include a trust or entity that attempts to hide the true ownership from the public and asset searches. In this case, “blind” refers not to the owner of the trust but to everyone else.

Here you create an entity, a trust or LLC, and name it something other than your name. For example, one of my actor clients titled his trust using an obscure quote from a former president of the United States. Unlike a politician’s blind trust, he has 100% control of the trust, assets, and decisions. This doesn’t completely cloak the account, but it can make tying the trust to my client more difficult in an asset search. For example, Louise White, the winner of a $210 million lottery, named her trust the “Rainbow Sherbert Trust” after the ice cream flavor that led her to the grocery store where she purchased the winning ticket.

Remaining Anonymous After Winning the Lottery: Using a Trust Within a Trust

For high profile lottery winners who want even greater anonymity, a trust within a trust structure is recommended. This is an advanced strategy that should only be taken with competent and experienced legal counsel.

One of my sudden wealth colleagues, Jason Kurland, is a “lottery lawyer” and partner at Certilman, Balin, Adler, & Hyman, LLP. Jason has represented several of the largest Powerball jackpot winners and specializes in protecting the anonymity of lottery winners. Jason is an advocate of the trust within a trust structure because it not only shields winners from requests for money, but also protects them from others.

The trust within a trust requires two trusts:

First Use a Claiming Trust

It’s called the Claiming Trust because this is the entity that claims the prize. As the winner, you assign the ticket to the trust. The trust, which now holds the winning ticket, can claim the prize. The Claiming Trust is a short-term trust that simply claims the prize and then distributes the win to the Bridge Trust. To keep your win as private as possible, the Claiming Trust should have a unique title not at all related or traceable to you. For example, you wouldn’t want the trust to have your name, address, or other identifiable information as the title.

Handing over ownership of a million dollar winning ticket to a trust that is not in your name can seem reckless and scary. Why is this strategy recommended? Rest assured, even though the name of the Claiming Trust won’t have your name, the trust will be directly tied to you. The Claiming Trust, like most trusts, include three types of people: (1) grantor – this is you, the creator of the trust and the individual whose assets are put into the trust, (2) trustee – this is also you, the person who manages the trust and makes decisions regarding investments and distributions and (3) beneficiary – again, also you, the person for whom the trust was created and who receives the benefits of the trust.

The astute reader may be wondering how anonymous the Claiming Trust is when your name is listed as grantor, trustee, and beneficiary throughout the trust document. It’s possible to create an irrevocable trust and name a trusted family member, attorney, or financial advisor as trustee whose only function is to immediately transfer the trust assets into the Bridge Trust for which you will have control. For the winner who wants to remain as private as possible, this is a potential strategy, but for most, I don’t recommend giving up control.

Although most revocable trusts use the Social Security Number of the grantor (i.e., you – the person setting up the trust), you want to avoid this. Why? State lottery commissions are state agencies, and as such, all of their records are subject to the Freedom of Information Act, which makes it easy for a reporter (or anyone else!) to request these documents and trace the Social Security Number back to you. For greater anonymity, depending on the state lottery commission’s rules, you may be able to have a limited liability company (LLC) act as the grantor.

Using this strategy, the winning lottery ticket would be owned by the LLC and the LLC would be the grantor of the Claiming Trust. If a nosy reporter gets a hold of the Claiming Trust, they wouldn’t see your name but would see the name of the LLC instead. However, some states have reporting requirements when forming an LLC that would identify the name of the person who owns the LLC. For example, in California, a Statement of Information for domestic and foreign corporations must be filed within 90 days of forming the LLC, which requires the complete name and addresses of its managers and officers. This is where it is important to work with an attorney well versed in the laws of your state.

Second Use a Bridge Trust

The lottery proceeds are paid into the Claiming Trust and then almost immediately transferred into the Bridge Trust. The reason the lottery proceeds aren’t simply paid to the Bridge Trust is because the Claiming Trust helps to shield the true identity of the winner – it is cloaked to avoid determining the true owner. The Bridge Trust, however, is not designed to protect the identity of the winner. The details of this trust are not subject to Freedom of Information Act requests, so your name can be listed as grantor and trustee, but because the trust name will be listed as beneficiary of the Claiming Trust, which is subject to Freedom of Information Act requests, it’s best not to name the Bridge Trust with personally identifiable information.

It’s called a “bridge” trust because this is the vehicle that holds and manages the assets for you while you determine if there needs to be more complex estate, charitable, and asset protection trusts/entities. But if you do not need more complex planning, the Bridge Trust is perfectly sufficient as your “living trust” and to serve as your main estate planning document, because unlike the Claiming Trust, it will have all of the necessary estate planning provisions.

Connect with me on Twitter @rpagliarini, my financial planning blog, or email me. This discussion is not intended as financial, legal or tax advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Here are several tips on how you can remain anonymous if you just won this week’s $1.5 billion Powerball lottery.

Lottery Trusts

First of all, CONGRATULATIONS if you are one of the few to win instant fortune in the state lottery! As soon as you realized you were the winner, you probably were envisioning your dream house, or your vacation in the tropics, the car you’ve always wanted, or the amount of money you’ll give to family. But before you take any steps to actualizing those dreams, you need to take a step back and make sure you’re ready to manage this new wealth. A “lottery trust” is an excellent way to do this—it can take the form of a blind trust, revocable trust, or another legal entity, and it can help avoid problems that will quickly come with such a large amount of money. Here’s an example: some states prohibit winners from remaining anonymous, but a blind trust allows lottery winners to still maintain their privacy.

If you’re a lottery winner, and if you’re wanting to establish a lottery trust, you want to make sure that you do it efficiently and effectively. Manfred Sternberg & Associates has extensive experience in establishing lottery trusts, and this means that we know that each individual lottery winner’s needs and desires will vary. We have the experience and knowledge to form a trust that meets your specific situation, and we urge to allow us to work with you quickly. In general, lottery winners who do choose to form a trust for their winnings need to establish the trust BEFORE claiming the prize.

Also keep in mind that you need to sign and secure your winning ticket immediately. Anyone who holds the ticket can redeem it, so make sure it is safe. Also make sure to be aware of the deadlines for claiming your prize!

When and Why Do I Need a Lottery Trust?

Some winners will not want or need a lottery trust. For example, if you’re married and have already set up a trust in your and your spouse’s name, you don’t need a new trust. You can deposit the winnings into the existing account. That’s a simple solution, but you may want to consider additional requirements of a trust. For example, a bypass trust will automatically name your surviving spouse as the beneficiary at your death, which will help reduce your family’s tax obligations.

No two winners have the same needs, requirements, and desires for their prize money. A good financial planner will make sure to understand and enact your wishes to protect your money and ensure smooth transitions both now and in the future, for you and for your family. But while every person is different, there are some basic factors all winners generally may address when considering a lottery trust. These include, but are not limited to:

  • Do you want to remain anonymous? Some people don’t want to be famous for winning, and they don’t want to deal with the media and harassment for donations that often follows winning the lottery. In the entire U.S., only a few states actually protect the anonymity of lottery winners. But if you put your money into a trust, the name of the trust becomes public, but not your name. This allows for much greater privacy on your part, and on your family’s part, as well.
  • Are you part of a group of winners? Many people – from family members to friends to co-workers – will pool their resources and purchase one number to enter the lottery. However, only one entity can actually claim the prize. Establishing an irrevocable trust in the name of the winners can ensure that the money is distributed fairly.
  • Do you want your money in payments or a lump sum? Deciding how you will receive your winnings has a direct impact on your tax obligations. Here’s an example of avoiding complications through a trust: if a winner decides to receive payments, but dies before all the payments are made, a trust assist in managing those yearly tax bills without leaving a family to figure it out on their own.
  • Are you married? Your lottery winnings will affect your marital property implications. Also, if you get married after you win, you may want to consider a prenuptial agreement that addresses your winnings.

Setting Up a Lottery Trust: Overview

Lottery trusts are managed by an appointed trustee, and while appointing yourself as the trustee is possible, appointing another person allows you to protect your privacy. Trusts also have named beneficiaries, which again may be just yourself, or can be family members. Many lottery winners who want to share their fortune set up a trust for each family member, or set up charitable trusts.

Regardless of what you choose to do with your money, it’s good to know the three kinds of trusts: blind, irrevocable, and revocable.

Blind Trusts

A blind trust means, as the name suggests, that you (and any other beneficiaries) do not “see” the detailed management of the money. You are not involved in the daily management—in fact, you do not even personally claim the prize. You establish the trust and donate your winning ticket to that trust, and the trust claims the ticket it is name. The trust will then invest the funds without your input. This is why it’s vital to appoint someone with experience in investment to oversee the fund. You want to, no pun intended, trust the person or people overseeing your trust fund.

Irrevocable Trusts

An irrevocable trust is generally the best legal entity for a single prize claimed by multiple people. If you pooled together for a ticket with family, friends, or coworkers, and you won, an irrevocable trust ensures the funds will be fairly dispersed to each member of the pool. This is accomplished by avoiding the tax consequences that come with transferring the money to multiple parties, a significant benefit to those involved. As its name suggests, an irrevocable trust cannot be altered or revoked, and therefore it prevents issues and disputes among the parties in the present and future.

Revocable Trusts

A revocable trust, also known as a “living trust,” means that you can establish the trust now, but change its terms later, such as altering whom you include as beneficiaries. Along with shielding your privacy, a revocable trust bypasses probate court when you pass away. This trust simplifies estate planning because the assets in the trust will pass directly to the beneficiaries you have named, and a review by probate court is not required. Also, if your spouse is the beneficiary, the trust can assist with reducing estate taxes, but will not reduce income taxes on the money you win from the lottery.

Talk to a Lawyer about Lottery Trusts TODAY!

So, you win the lottery. Everything inside you wants to celebrate and dream, but take a few deep breaths first and remember how you plan and prepare to secure your winnings is vital. Think about the long-term future, and consider hiring the experienced trust attorneys at Manfred Sternberg & Associates. Let our team help you claim your fortune in confidence that it will last and will bring enjoyment rather than anxiety. Give us a call today!

Claiming a Jackpot Anonymously

Protect Yourself & Your Winnings

Watch this video to learn more about how to claim the jackpot anonymously:

Fame often sounds appealing, but lottery winners find that being in the spotlight isn’t as enjoyable as society makes it out to be. In fact, instant fame can be terrifying when it comes from instant wealth. Jackpot winners must immediately think about their and their families’ safety. The media will swarm around winners, invading personal privacy. Charities and people in need will solicit you for help. People you haven’t talked to for years, or that you may not even remember meeting, will ask you for money, from long lost family members to business acquaintances. Once your privacy is lost or compromised, you cannot take it back. That is why we advise specific steps to limit exposure of your win, or to preserve anonymity completely. And these steps must be taken BEFORE you claim your ticket with the Lottery Commission.

It’s not easy to claim your ticket anonymously. As of 2016, only six (6) states allow winners to claim their ticket anonymously: Delaware, Kansas, Maryland, North Dakota, Ohio, and South Carolina. The possibility for anonymity depends on the state where the winning ticket was purchased. The Lottery Commission in certain states will not release the money until they have held a press conference stating the winner, but others are more flexible if the winner does in fact wish to stay anonymous. It’s important to know where your state lies in this spectrum so that you can, once you win, instantly begin the process of protecting yourself and your family.

If you’re a lottery winner, and if you’re wanting to establish a lottery trust, you want to make sure that you do it efficiently and effectively. Contact us ]]>