Lottery Trusts

A lottery trust can alleviate some of the biggest problems lottery winners face. These issues can begin soon after multimillion-dollar windfalls.

Very few people will win your state lottery, Mega Millions, or the Powerball lottery. For those lucky winners, you may want to consider working with an attorney to set up a lottery trust. This financial tool can help you manage your newly acquired wealth.

You can speak with a financial planner or an estate planning attorney before you claim payment on your lottery jackpot. There is no one-size-fits-all answer to the challenges of a sudden lottery win. Each lottery winner's needs and wants will vary.

In this article, FindLaw discusses the benefits of a lottery trust. You'll learn the reasons to set up such a trust for your lottery winnings before claiming them.

Immediate Tips to Safeguard Your Win

You should be aware of common tips for lottery winners, including the following:

  • Anyone possessing a winning lottery ticket may redeem it, so sign and secure it once you discover you're a winner
  • Leave room on the check for a trustee to co-sign
  • Be aware of the deadline to claim your prize to avoid accidentally losing out

Why You Might Want a Lottery Trust

Setting up a trust may sound like a lot of extra work. You've just had the most significant stroke of luck in your life. Winning that amount of money is probably a dream come true. You want to enjoy it immediately!

Learning about asset protection strategies before you take your winnings is beneficial. These strategies include setting up:

Financial planning has never been more important than the aftermath of your lottery win. You'll need to consider everything from your increased tax burden to your options for asset preservation.

Significant benefits of establishing a lottery trust include the following.


Only a handful of states allow lottery winners to remain anonymous. When you put your winnings into a blind trust, only the name of the trust and trustees becomes public. This prevents you, the lottery winner, from being overwhelmed with personal requests for cash and scams. Everyone from loved ones to social media followers will probably approach you if they know you are a lottery winner. You can tell whomever you want and give to whomever you want, but you can prevent the whole world from knocking at your door.

Multiple Winners

Workers or family members commonly pool resources and enter the lottery using the same number. Only one entity can claim the lottery prize. Thus, funding an irrevocable trust for all the winners ensures a fair distribution of the lump sum payment.

Payments or Lump Sum

Your lottery winnings will affect your tax liability. How you receive your lottery winnings will affect your federal tax obligation. It will immediately make a difference in your income taxes. If you die before all payments are received, a lottery trust can continue receiving payments. The trust can then immediately pass those assets along to your heirs.

Marital Property

If you plan to marry after winning the lottery, a trust will protect your lottery winnings. You can prevent it from becoming marital property. A prenuptial agreement will also offer protection.

If you are married, you can set up a new trust or deposit your winnings into an existing trust account. Consider a bypass trust that automatically names a surviving spouse as the beneficiary. It will also help to reduce your family's tax obligations.

How an Estate Planning Attorney Can Help Create a Lottery Trust

Talk with an estate planning attorney about protecting your lottery winnings so that they last. An estate planning lawyer can provide the legal advice you need as well as practical tips.

A lawyer can draft a lottery trust document defining the terms of the trust. They can help you move your winnings so they become the trust's assets.

The trust document can name one or more trustees. It may designate a successor trustee as well. As the winner, you can appoint yourself as a trustee. However, appointing another individual will protect your privacy.

You will then name beneficiaries to the trust, which may be your family members or just yourself. Lottery winners often set up individual trusts for each family member. A lottery winner can also set up charitable or other types of trusts.

What type of trust will work best for you during your lifetime? Let's learn more about these trusts:

  • Blind trusts
  • Revocable living trusts
  • Irrevocable trusts

Whatever type of trust you choose will shield your lottery winnings from estate tax and the time-consuming probate process.

A Blind Trust

blind trust can be a revocable trust or an irrevocable trust. With a blind trust, the lottery winner and the beneficiaries have no idea where the trustee invests the assets. A third-party trustee claims the ticket in the name of the trust and chooses where to invest the funds.

The lottery winner can name beneficiaries. They can also indicate goals for the trust's investments. However, the lottery winner cannot be involved in decision-making or day-to-day management after it's created and funded. The trustee has no communications with the beneficiaries about the handling of the assets.

This provides the highest degree of privacy. It avoids any conflict of interest, a trait that may be important to people in certain positions of trust.

A Revocable Living Trust

A revocable living trust is established during a person's lifetime. The grantor can revoke it at any time. This means the grantor regains total control of the assets and can end the trust. The grantor funds the trust and names beneficiaries. They also name the trustee(s) and can name themselves as trustee, along with a successor trustee.

If the grantor names themselves as trustee, they do not expect privacy as they would with a blind trust. They also lose some of the tax benefits of a trust.

An Irrevocable Trust

An irrevocable trust is considered the best type when multiple individuals claim a single prize. These work well in situations such as workplace lottery pools. Irrevocable trusts allow the funds to be dispersed to each winner in the pool without relying on a single winner's honesty.

An irrevocable trust may not be revoked or altered. Thus, an irrevocable trust avoids the tax consequences of transferring the winnings to multiple parties. It helps to prevent future disputes among the parties.

Protect Your Lottery Winnings — Talk to a Lawyer About a Lottery Trust

Today is your lucky day. Make sure tomorrow is a lucky day, too. Preserve your lottery winnings with the help of a lottery trust.

Before claiming your winnings, you can set up a trust to protect your privacy, assets, and beneficiaries. Talk to an estate planning attorney licensed in your state as soon as possible.

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