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By Simon Volkov
Winning the national lottery would certainly be an exciting event for nearly anyone. Every year, millions of dollars are amassed through the sale of lottery tickets purchased by people that dream of striking it rich.
In the U.S., the national lottery refers to games like Mega Millions and Powerball. Part of the ticket sales in each state is used to improve education while the rest accumulates until someone selects the winning lotto numbers.
Along with national lotto games, most states also offer lottery tickets through their state system. National lotteries have significantly higher jackpots than state games, but the odds of winning are also much higher with the average odds of 1 in 18 million.
To date, the biggest Mega Millions jackpot ever paid out was $380 million, while the biggest Powerball jackpot was $340 million.
There is little question that amount of cash would forever change a person’s life. Winning a multi-million dollar lotto jackpot would provide financial freedom that most people can’t even imagine. Nonetheless, there are drawbacks associated with suddenly acquiring large amounts of money.
One of the more significant problems is managing undesirable fame. There have been many reports of lottery winners being inundated with uninvited guests and long-lost relatives arriving on doorsteps. One ways to keep newfound wealth private is to hire a personal representative, such as a lawyer or financial consultant, to claim lottery winnings.
Another consideration is the amount of taxes due on lotto winnings. Winners are responsible for paying federal and state income taxes, which often amount to about half of total winnings. One of the best approaches is to hire a financial planner. Professionals can help winners engage in methods to lessen taxes, along with strategies to increase earnings through investing.
Winners can elect to receive their money as lump sum cash or annual installments. People that win millions of dollars are placed into a different tax bracket and may be subjected to higher tax rates. Accepting installments typically provides more money in the long run and can also lessen payable taxes.
Financial planners can help winners develop investment plans that reduce taxes and expand winnings. These could include transferring funds to tax-sheltered retirement accounts like a Roth IRA or placing money into an irrevocable life insurance trust.
In addition to national lotteries, state games also provide large cash prizes and valuable items such as cars and vacations. All prizes obtained from legal gambling are subject to state and federal income taxation. Cash and prize values have to be reported on personal income tax returns. These include money and prizes won through contests, sweepstakes, dog and horse racing, raffles, lotteries, and casinos.
To offset lotto winnings, taxpayers are allowed to deduct gambling losses from tax returns as long as adequate documentation is provided. Anyone that gambles regularly needs to setup accounting practices to track losses and winnings.
Lotto jackpot winners should think about hiring an estate planner to protect money for future generations. Estate planners can make use of different methods that reduce estate and inheritance taxes and broaden financial investments.
Sadly, more than one person has invested their life savings in hopes of winning the national lottery. Gambling can quickly turn into an addiction that drains bank accounts and ruins relationships. It is crucial to retain control over personal finances and never spend more cash than you can afford to lose.
About the Author: Anyone that is fortunate enough to win the
needs to become educated about ways to maximize their newfound wealth. Financial expert and real estate investor, Simon Volkov provides estate planning and investing strategies to reduce lottery taxes at