Winning the national lottery is a fantasy for most people. Americans spend billions of dollars in hopes of matching lucky numbers or revealing winnings on scratch off tickets. They dream of all the things they will buy and investments they will make.
Americans often refer to the national lottery when speaking of games like Mega Millions and Powerball. Lottery winnings are amassed from people purchasing lottery tickets across the nation. Individual states also have their own lottery system with region-specific games.
With national games, lottery winnings can amount to several hundred million. The highest lottery jackpot recorded occurred in January 2011 and amounted to a whopping $380 million paid out through Mega Millions. The highest Powerball winning to be recorded amounted to $340 million.
It's no wonder people desire to win. That amount of money would forever change any person's life and could provide inherited wealth for generations to come. There's no doubt it would be intoxicating to win a lottery jackpot. However, once reality sets in lottery winners will face issues they never considered.
The biggest hurdle of winning a lot of money is dealing with the notoriety. Countless stories circulate about how long-lost relatives show up at lottery winner's doorsteps. People that prefer to keep winnings private can have a representative, such as a lawyer or financial advisor claim the money on their behalf.
While it's fun to fantasize about tossing wads of money into the air, the reality is it isn't cheap to win jackpots. The taxes alone can easily consume more than half of funds won. The first thing winners should do is find a good financial consultant. They can offer guidance about tax saving strategies and help maximize winnings.
Taking lump sum cash may sound appealing, but is the costliest approach. When a person wins several million dollars their tax status changes and they pay a higher rate. Financial advisors can develop investing plans to offset taxes by putting funds into tax-sheltered retirement accounts, like a Roth IRA, or an irrevocable life insurance trust.
While the national lottery supplies mega-million cash jackpots, other games offer valuable prizes as well. Scratch-off lottery tickets provide cash, prizes, and free tickets. These winnings are also subject to taxation at state and federal levels.
Furthermore, winnings obtained through any type of gambling are subject to income tax. This can include prizes won through raffles, sweepstakes, contests, casinos, and dog or horse racing.
The good news is gambling losses can be deducted from personal tax returns as long as adequate documentation is provided. Anyone that gambles on a regular basis ought to devise an accounting system to keep track of income and expenses.
Lastly, jackpot lottery winners can engage in estate planning methods to pass along inheritance cash to loved ones. It's important to work with professionals to minimize inheritance taxes and expand portfolios with good investment products.
Unfortunately, the desire to win the national lottery has caused more than one person to spend their life savings in hopes of the big win. Gambling can quickly turn into an addiction so it's vital to keep a tight rein and never spend more than one can afford to lose.
While waiting for your national lottery windfall, we invite you to peruse our personal finance article library and learn ways to maximize the money you already have. Topics range from investment opportunities to overcoming debt problems.
Published on December 07, 2011 at 03:28 AM
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