One of the more recent stories of "lottery winners gone bad" I've read was about an old, devout, church-goin guy in Tennessee who won and turned into a jerk that drank and picked up prostitutes. I kept wondering why would anyone stay in TN if they wanted to do that? Go to Monte Carlo and get some fancy Russian hookers.
I can guarantee that I would not spend my lottery winnings foolishly, I wouldn't get addicted to coke or hookers, and racecars are not an addiction anyway...
Go ahead. Give me 25 million dollars, and I'll prove that I'm disciplined.
I can't speak to the lottery but when I traveled for work I paid taxes for the State I earned the taxes in, I suspect even if you relocated to another state you'd still be on the hook for taxes in the state you bought the lottery ticket in regardless of where your residency was. I'm not a tax professional but I suspect changing residency wouldn't gain you anything in a hypothetical windfall scenario like this.
Mr_Asa said:Also, you don't want to win the lotto.
To give you just a taste of the possibilities, consider the fates of: ...
I think about all the people that have ever asked me "do you want to buy into a block of lotto tickets?" I totally believe this.
dclafleur said:I can't speak to the lottery but when I traveled for work I paid taxes for the State I earned the taxes in, I suspect even if you relocated to another state you'd still be on the hook for taxes in the state you bought the lottery ticket in regardless of where your residency was. I'm not a tax professional but I suspect changing residency wouldn't gain you anything in a hypothetical windfall scenario like this.
I suspect this is the correct answer. If you won the lottery in a state, you pay their taxes, just like working and actually making the money.
It's going to be real hard to dodge taxes on something when the same entity that is giving you the money is the one taxing you for it.
I don't know anything about the trust plan to dodge the taxes, but I am almost certain even if you could do that the trust will owe the taxes, otherwise at least someone would have done this already. You bought the ticket, not the trust, so that alone I think would invalidate that idea. I also suspect they might pull the taxes as they give you the winnings (kind of like a bonus check).
The gubmint', they do take a bite!
Imagine if Frenchy won the lottery! The supply of used V12's would suddenly disappear!...
....there is this weird guy who lives on the edge of town. Rumor is he as three warehouses full of old V12's. No one knows why....
In reply to aircooled :
The trust is not to avoid the taxes, it's to keep the cash supply safe.
Cash option is almost 50% tax, annuity, last I looked here anyway, measured out to over 30%, paid over 20 years. A lot can happen in 20 years, and as they are (I've never looked into this I just suspect gubmint as treacherous) I don't think the annuity payouts transfer at death. A trust will never die, and is transferable through generations. It can also be used as a tool to control assets, ie you win $20M/year for 20 years, that can stay invested while the trust pays out like $100k/year for living expenses.
But I only buy tickets when it's $500 million or more. Having guaranteed income like that opens up lots of doors credit wise, investment wise, moving to a tropical island and living like a king wise.
frenchyd said:My state has a relatively high income tax. Pretend I won a really big lottery, could I avoid state income tax on that by moving to a non income tax state?
What's considered a move? Do I have to physically be in that state when I claim the prize? When I buy the ticket? Do I have to own property in That state? Do I have to sell my property in my state?
What about avoiding Federal income tax? Any legal way to claim the prize if I'm a "resident" of some low tax country?
The ticket gets claimed in the state where it was purchased. Each state has a pre-determined amount that is automatically withheld for taxes, but that may not be all you owe.
Regardless of annuity or lump sum, I believe that your total tax liability is either that of the state in which you purchased the ticket or the state of your residence on the date of the drawing... Whichever is GREATER. So one of the few ways in which you can reduce the taxes you might otherwise owe on your winnings, if you have the option of buying in-state or out-of-state, is to not buy a ticket out of state from a state with a higher tax rate than that of your residence.
Ultimately, changing residence after the drawing does nothing to change your tax liability at all. I believe that similar holds true for the federal taxes.
The reason you keep seeing more and more $500M jackpots on PowerBall and Mega MIllions, is because they keep making the odds worse, knowing that the bigger the jackpot the more media attention there will be and the more people will play, almost entirely without regard of how the odds have changed. I did the numbers on playing PB/MM in a group vs playing state lotto individually, on a 'large jackpot' basis only. The state lotto had similar odds and a similar after tax payout (depending on how many winning tickets) for less than half the buy-in.
As I understand it, your tax liability is based on the state where the ticket was purchased. If it's a national lottery (powerball), you are taxed on where you purchased the ticket. If its a state lottery, you're taxed for that state as well. It's no different than if you drive to a different state and buy dinner at a restaurant. You pay that state's tax, not your home state's tax.
There are ways to avoid paying the tax, but they are nearly impossible to do and don't end up saving you any money. You can set up a non-profit receivership or LLC and sign the ticket over to it, but that takes incredible amounts of money and time and you'll still have to pay almost as much in taxes.
If I won the lottery, I would just pay the tax and invest the rest. Keep it above board. If you win $350 million in the powerball and can't survive on the $175M you get to keep, I have no sympathy 
What I would do is "give" it to one of the bros in Montana. Yes, I trust him that much
You have 12 months to collect your winnings. Instead of asking a bunch of notorious cheapskates on line, put the winning ticket in a safety deposit box then spend 12 months finding the best tax and estate lawyers you can and setting up trusts etc. Then take the lump sum, pay the taxes you owe on your winnings and live happily ever after. How anyone can complain about paying tax on lottery winnings for which the 'work done' was spending $2 on a ticket is beyond me.
RX Reven' said:In reply to Mr_Asa :
We need to normalize those stats against all lottery players, not just the winners...may well be par for the course.
Yes.
If you think about it through the lens of "people who play the lottery", it makes a lot of sense.
barefootskater (Shaun) said:It's easier that moving or hiring attorneys. Just get the folks that write the tax code in your pocket. If the lotto you win is big enough, you could likely lobby several legislators and still have a good chunk left over.
Just saying.
If you won the largest lottery in the country, you are still dirt poor compared to those people who lobby to get tax laws changed in their favor. A bigger gap than between an upper middle class execudroid and the panhandler on the street that he tactically pulls forward from at a stoplight.
Adrian_Thompson (Forum Supporter) said:You have 12 months to collect your winnings. Instead of asking a bunch of notorious cheapskates on line, put the winning ticket in a safety deposit box then spend 12 months finding the best tax and estate lawyers you can and setting up trusts etc. Then take the lump sum, pay the taxes you owe on your winnings and live happily ever after. How anyone can complain about paying tax on lottery winnings for which the 'work done' was spending $2 on a ticket is beyond me.
It varies state to state, I think most of them are only 6 months to claim. This is true even for the national lotteries (Mega Millions and Powerball).
If I win one that big, my big concern is staying anonymous, not the taxes.
ProDarwin said:RX Reven' said:In reply to Mr_Asa :
We need to normalize those stats against all lottery players, not just the winners...may well be par for the course.
Yes.
If you think about it through the lens of "people who play the lottery", it makes a lot of sense.
Somewhere I have a photo I took of a woman in a casino. She had one of those walkers that was also a chair, an oxygen tank and a cigarette in her mouth and she looked to be 112 years old. She was plugging dollar bills into a slot machine and I got a shot of her with a 50' marble column in the background. People can't put together the fact that it's their dollar bills that are paying for that marble. It's a really expensive building for a reason - the odds are stacked against you.
The local corner store here I kept seeing a lady in there with a stack of (not exaggerating) probably 50-60 instant scratch offs. I always assumed she was with the PA lottery and there to pick up the winning tickets for the day. No. Just a customer who buys 50-60 scratch offs every day.
In reply to Curtis73 (Forum Supporter) :
That was a pretty regular thing at the Sunoco Dana managed until we moved. Several people mainly women, daily, getting stacks of scratchers. The men more often played the "Pennsylvania skill machine" little virtual slot machine/cherry master clone.
Lottery tickets count as gambling losses which are tax deductible, but most of these people don't earn enough in a year to bother filing. I say most because I know two CPAs at different firms who always bitch about a handful of people they do returns for making more than the accountant and writing off 10's of thousands in lottery tickets and casino losses. It does span the economic spectrum.
Wow, these stories of people spending $50-60+ a day on lotto tickets is tragically sad. I've always been a defender of lottery games as I see my occasional $8 (4 x $2 Mega Millions tickets) as a buying me a daydream on my way home from the store. I honestly didn't realize people spent this much daily. I guess I should, I've just never thought about it in those terms.
In reply to Adrian_Thompson (Forum Supporter) :
When you play often enough, sometimes you get that $500 or $1000 win that justifies the $10k you spent to get there.
In reply to Pete. (l33t FS) :
Drops in the bucket for sure, but the theory is the same. Everyone is quick to complain about their tax burden, and even quicker to complain about the ultra wealthy that seem to "not pay their fair share" but the real issue always has been and always will be morally deficit politicians.
In reply to barefootskater (Shaun) :
I don't. While I do everything I can as an individual to legally minimize the tax I pay. At the same time as a citizen of these United States I honestly believe that people like me, and a lot of others up and down the income level from where I'm at, should be paying more in taxes to pay for infrastructure, benefits and health for the rest of the nation.
In reply to Adrian_Thompson (Forum Supporter) :
A lot of the things you can legally do to minimize your tax burden are legal because they want you do to those things.
Not all of them, of course. Like doing everything you can to minimize your monetary needs so that you can survive below the income level where Federal taxation starts. (There are people who do this in New England, or maybe Pennsylvania, for religious/moral reasons, as it is against their beliefs to support war in any way. And it is not like you can dictate that your tax payments go to fund hugs for puppies instead of F-35s)
Adrian_Thompson (Forum Supporter) said:Wow, these stories of people spending $50-60+ a day on lotto tickets is tragically sad. I've always been a defender of lottery games as I see my occasional $8 (4 x $2 Mega Millions tickets) as a buying me a daydream on my way home from the store. I honestly didn't realize people spent this much daily. I guess I should, I've just never thought about it in those terms.
I can't honestly remember when the last time I bought a lottery ticket was. The most I've ever blown was several years ago I spent $8 on an absolute sense that I was going to be lucky. I was!! I got $2 back!!!!
barefootskater (Shaun) said:In reply to Pete. (l33t FS) :
Drops in the bucket for sure, but the theory is the same. Everyone is quick to complain about their tax burden, and even quicker to complain about the ultra wealthy that seem to "not pay their fair share" but the real issue always has been and always will be morally deficit politicians.
Here is the problem with those politicians. Power, real power comes with seniority. You get on the right committees and make enough deals so people owe you.
But that doesn't come to the new guy. No 1 term congressman can change anything. Plus when you finally do get that seniority your party might not be in power.
It may be several terms before that power you traded everything for comes around to your benefit and you are after all mortal.
Don't forget the whole time you're in office your job is to bring home as much pork for your district or state as possible so you can get Re-Elected in order to continue to build seniority. You seldom are in a position of statesmanship. Where you can think about what is best for the country over your district/ State.
While the president is supposed to think about country over party, he still has a responsibility to party over country. They helped ge him elected.
The plains truth is it's complicated. And simple slogans work so well but in the end hurt the country.
My grandfather said it best. "Gambling is a tax on people who are bad at math."
(although I sometimes buy a Powerball ticket just in case)
Adrian_Thompson (Forum Supporter) said:You have 12 months to collect your winnings. Instead of asking a bunch of notorious cheapskates on line, put the winning ticket in a safety deposit box then spend 12 months finding the best tax and estate lawyers you can and setting up trusts etc. Then take the lump sum, pay the taxes you owe on your winnings and live happily ever after. How anyone can complain about paying tax on lottery winnings for which the 'work done' was spending $2 on a ticket is beyond me.
Knowing the odds and how rare I indulge it's purely something to think about when sleep evades you.
On the other hand, a bird in hand••••.
So I'd run to collect ASAP pay taxes owed. Go hide for a while while I do what I can to protect myself and the money. Trusts, Lawyers, donations, etc. When it's gone, return to a pretty decent life. Maybe Ive already won?
Adrian_Thompson (Forum Supporter) said:You have 12 months to collect your winnings. Instead of asking a bunch of notorious cheapskates on line, put the winning ticket in a safety deposit box then spend 12 months finding the best tax and estate lawyers you can and setting up trusts etc. Then take the lump sum, pay the taxes you owe on your winnings and live happily ever after. How anyone can complain about paying tax on lottery winnings for which the 'work done' was spending $2 on a ticket is beyond me.
I will add to this to say: After you find the best tax and estate lawyers, find another set of lawyers to watch the first set.
Lawyers (investment managers etc.) "managing" peoples money have definitely screwed people in the past.
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