Winning the lottery is something that almost everyone dreams of doing, even those who never buy a ticket.
Everyone has had that conversation with friends, family or colleagues along the lines of “what would you do if you won the lottery?”
For those lucky few who have won life-changing amount of money in the lottery, there is actually a lot to think about when it comes to handling the money.
What is Lottery Annuity?
Generally speaking, winners in the USA have the choice as to whether they receive all of their winnings in one lump sum, or if they take annuity payments which means the money is released in instalments.
Taking all the money at once allows you to make a high-profile investment immediately into property or stocks.
Taking the money over time though can have major tax benefits and will see you receive a figure much closer to the advertised jackpot number.
The August 2022 Powerball jackpot had reached 206.9 million when a single winning ticket was sold in Pennsylvania. If taken in a lump sum, the recipient would get 122.3 million dollars.
If the winner opted to annuitize their payout with 30 payments over 29 years, they’d have got the full 206.9 million over three decades.
This does raise the question though of what happens when a lottery winner has chosen the annuity route but then dies?
What happens if you die before receiving your entire lottery winnings?
It is often rumoured that the government gets to keep the money that has not been paid yet, but it is generally passed to the winner’s heirs.
Some lottery companies actually only allow for a transfer of the funds only when the annuity owner dies.
Some lotteries will cash out an annuity prize for an estate, to make it easier for the estate to distribute the inheritance and to pay federal estate taxes when they apply.
