Know the Law: Legal Steps to Take After Winning the Lottery

Chris Paul Headshot
Christopher R. Paul
Director and Vice-Chair, Trusts & Estates Department
Published: Union Leader
July 30, 2018

Q: My husband and I are New Hampshire residents and we just learned that we have the winning Powerball lottery ticket of a recent $64 million drawing. Are there steps we can take to protect this windfall?

A: Let me congratulate you on your good fortune.

Yes, there are immediate steps you and your husband should consider. I can sense from your question that you are familiar with the well-publicized travails befalling lottery winners, such as becoming targets of litigation or unscrupulous creditors, suffering harassment by friends, relatives and charities, or falling victim to investment schemes and poor financial advice.  Significant wealth can profoundly change your lives and it is imperative that you take steps to protect yourselves, minimize taxes, and preserve your new found wealth and lifestyle.

First, place your ticket in a safe deposit box.  Do this before you sign the back of your winning ticket!  Next, take a deep breath and consider your options. You have time – in New Hampshire, you have one year from the date of the winning drawing to claim your prize.

Contact a qualified New Hampshire attorney.  Interview more than one. Many of the appropriate asset protection and preservation strategies are quite complex.  Hiring an attorney experienced in advising lottery winners and those that inherit significant wealth is imperative.

You will need a comprehensive review of your insurance including homeowners, umbrella, and automobile property and casualty policies.  If you elect to receive periodic payments, you may need life insurance to avoid liquidity problems from federal (or state) estate tax liabilities. Your attorney can help assemble a team of appropriate advisors which will include a qualified financial planner, insurance professional, investment manager and accountant.

Many winners hope to keep their identities out of public disclosure.  New Hampshire residents can claim lottery prizes “anonymously” by having the prize claimed by a third party, often a Trustee of a trust they create for their (or others’) benefit.  This keeps their identity out of the Lottery Commission’s public record, while the winner retains the beneficial interest in the prize money.

Do not forget income taxes.  The Lottery Commission is required to report winnings over $599 to the IRS.  There is a federal tax withholding requirement of 24% for any winnings over $5,000.  Because the top federal rate for 2018 is 37%, the withholdings may be insufficient to cover your liability.

Again, congratulations.