Winning a national lottery is something many people dream about. U.S. citizens spend billions of dollars each year buying lottery tickets in hope of striking it rich. Unfortunately, many lottery winners end up broke within a few years because they squander winnings instead of putting their newfound wealth to work.
In the U.S. the national lottery includes games like Mega Millions and Powerball. Payouts are determined by the number of tickets sold and the amount of accumulated funds from previous drawings that did not have winning tickets.
These jackpots often grow to staggering amounts that have, at times, exceeded $300 million. The largest Mega Million jackpot payout amounted to $380 million, while the largest Powerball jackpot payout was $340 million.
Few people would argue that winning lottery jackpots would forever change a person’s life. Winning millions of dollars lets people live the life of their dreams and still have plenty of money to pass along as inherited wealth for future generations.
On the flip side, there can be many complications that arise with winning large sums of cash. One challenge many jackpot lottery winners face is dealing with fame and notoriety. A lot of people do not know they can keep their winnings private by hiring a lawyer, financial adviser, or personal representative to claim their lottery winnings and keep their name out of the paper.
While it can be intoxicating to fantasize about spending mountains of lottery cash, the truth is it is expensive to win jackpots. State and federal income taxes can amount to nearly half of winnings. The best strategy is to promptly hire a trustworthy financial consultant to learn ways to lessen taxes on lottery winnings. haihuayonline.com
Taking winnings as lump sum cash typically costs more than taking smaller annual payments. People that win millions are placed into a higher tax bracket and subjected to higher taxes.
Financial planners can help winners develop investment plans to lessen tax burdens. Strategies can include accepting annuity payments; establishing an irrevocable life insurance trust; or depositing funds into tax-sheltered retirement accounts like a Roth IRA.
It’s also crucial to work with a tax accountant to ensure winnings are reported correctly on income tax returns. Regardless of whether a person wins the national lottery jackpot or cash or prizes from state games, all winnings have to be reported to the IRS. This also includes cash and prizes won from sweepstakes, contests, horse or dog racing, and casinos.
Taxpayers are allowed to report gambling losses on personal tax returns as long as adequate documentation is presented. People that engage in legal gambling on a regular basis need to setup recordkeeping systems and accounting methods to keep track of winnings and losses.
Lottery winners should also work with estate planning professionals to protect their newfound wealth for their family. Estate planners can help winners understand which methods will lessen inheritance and estate taxes and expand financial investment portfolios.
Sadly, many people spend money they don’t have in their quest to win the national lottery. Gambling can turn into an addiction that requires professional help to overcome. Individuals that play the lottery should never spend more money than they can afford to lose and always bear in mind that the chances of winning mega jackpots is 1 in 18 million.