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How to manage a lottery win

By Judy Martel · Bankrate.com
Wednesday, December 7, 2011
Posted: 3 am ET

Given that most lottery winners lose it all within three years, it's notable to take a closer look at how the three Connecticut money managers are handling their $254 million Powerball win.

The partners in a wealth management company, Greg Skidmore, Tim Davidson and Brandon Lacoff, opted for the lump sum of $103.5 million instead of a 30-year annuity, a smart move if the highest income tax rate rises from 35 percent to 39.5 percent at the end of 2012. In addition, if one of the three were to die soon, heirs would be on the hook to pay estate taxes for the present value of the gift even if it were being paid in installments over 30 years. That would mean they'd have to come up with a big chunk of change before the estate even received all the lottery winnings.

The winners have set up a trust to manage the lottery money and have pledged $1 million to veterans groups. The current gift/estate tax exemption is $5 million ($5.12 million in 2012) per individual, with a 35-percent tax rate on anything in excess of that amount. On Jan. 1, 2013, the exemption reverts back to $1 million with a 55-percent tax on the excess, so timing is in their favor.

According to an article in Investment News, the three have said they plan to use their investment expertise to increase the amount in the trust and use it as a model to inspire others to help the less fortunate. The five veterans groups that will receive a portion of the winnings are the first recipients of that largesse. In a statement, the trio said: "Many of these veterans are faced with a myriad of real and immediate personal issues that range from trauma to foreclosures. These grant awards reflect the beginning of a process that allows us to leverage lottery winnings into materially helping our society."

What do you think about the way the winners are handling their jackpot?

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Sal Paradise
December 23, 2011 at 11:08 pm

I keep wondering why all states do not allow winners a choice in claiming their prizes. Some, I don't know how many, let you claim in a trust or in other ways that protect your identity. I just don't see why states don't allow a choice. They say it's due to public record laws, but in most cases those laws are only for state business (contracts, etc) where there is a financial or legal interest. However, lottery winners do not fit in that group. At most, winners are just used for Lottery Agency PR campaigns. Free PR basically. Self-promotion. But, that PR exposes winners to all sort of problems they wouldn't have if allowed a choice. Some may want the pub, but I'll bet most don't. I bet if states all allowed choice that sales would go up, and people would feel more at east playing. I know I buy my tickets in states that give you a choice. That's money my home state doesn't get from me. Maybe enough people will do the same and eventually force them to change that stupid, and dangerous, no-choice policy they have.