As you begin your holiday shopping, some of you may be purchasing lottery tickets for yourself or your loved ones for a chance to win big. If you or your recipient are lucky enough to hit the jackpot, just remember the most important thing to do next: maintain your family’s privacy and security while managing your winnings responsibly.
When you go to the Lottery Commission to claim your prize, you will learn that Massachusetts lottery regulations require you to disclose your name, your city or town, provide your photo ID and state your winnings. Your photograph will be used to publicize the lottery, and your newfound wealth will become a magnet for attention. But there is a way to avoid such notoriety, and you should seek legal guidance before you claim the prize.
You’re not required to claim the prize immediately, and there are significant advantages to being well prepared before your name becomes public. Here are some of the issues to discuss with your lawyer:
1. Anonymity: You may be able to maintain your anonymity by establishing a trust. In that case, your trustee would accept the money, and your name would not be publicly disclosed.
2. Structured Payments vs. Lump Sum: You may have to choose between collecting your prize as a lump sum amount or collecting it through annual payments over a period of years. You should carefully consider the implications of that choice. A lump sum payment maximizes your immediate cash, but the number of dollars you’ll receive is significantly smaller than you would receive through annual payments. On the other hand, every dollar you receive in the future will be worth less than the dollar you receive today, because of inflation.
3. Tax Implications: The amount of taxes withheld by the Lottery Commission may be insufficient to satisfy the tax liability that results from your windfall. The Lottery Commission is required by law to withhold 25 percent for federal taxes and 5 percent for state taxes. If your lottery winnings bump you into a higher tax bracket, however, you may owe taxes in excess of the amount withheld.
4. Future Planning: You should decide in advance what you want your prize to do for you. You may wish to preserve some of the money to provide financial security for the remainder of your life. You may wish to ensure that some of it is available to your children or to subsequent generations. Identifying such goals—or deciding against them—should be done as early as possible.
