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How much could you give away?

Topic closed. 13 replies. Last post 9 years ago by sirbrad.

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Posted: October 9, 2005, 11:00 pm - IP Logged

I heard some say that you are limited as to how much you could give away, due to taxes etc. How much would these gift taxes be, and are they only paid once? For example, say I won the 240 million, and I only wanted to set up a family member with about 2-3 million on an interest bearing account.

That should not be a probelm right? What would be the tax on that? I am not talking giving 50% of the jackpot away to a stranger, but more so just helping out your family, or those closest to you. Seems that the lottery wants all the money for ticket sales, but all the tax issues tend to put a damper on the windfall. Which is why most wait until the jackpot is very high before they even play.

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    Sparta, NJ
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    Posted: October 10, 2005, 8:36 am - IP Logged

    There is no penalty for wife and children. The penalty is under the Money Laundering portions of the law. You can still give away money, just not tons of it.

    Obviously, there are many ways around that law. Form a corporation. Pay those people a fortune to do something they cannot do; e.g. manage your real estate purchases. Have a huge sign-on package, and an even larger termination clause. Huge salary. Huge house. Huge expense account. Terminate for cause. All you need is the lawyers to create the correctly worded contracts. Hey, whats his name at Disney did it.

    Cheers

    |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

    I only trust myself - and that's a questionable choice

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      Sparta, NJ
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      Posted: October 10, 2005, 8:49 am - IP Logged
      The Morning After: Tax Planning for Lottery Winners

      http://www.williamsmullen.com/news/articles_detail/019.htm

      I don't understand half of it, but it is interesting.

      Cheers

      |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

      I only trust myself - and that's a questionable choice

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        Posted: October 10, 2005, 9:13 am - IP Logged

        That was a very interesting article.    We already have a Unified Credit Trust.  Anyone with more than $600,000 in net assets should have one.    (Sure it goes up to every year...but in 2010, it reverts to the old balance of  $600,000.)  It also protects your assets for your children, should you pass away and your spouse decides to marry a "sponge bob or betty".   

         

        As for how much I would give away,  the minimum to established charities would be 10%.  We already have several charities that we donate to on an annual basis.    You can also buy your friends or relative's homes  (for an outlandish  - but not tooo outlandish - amount) and then give them a life estate. (ie - they get to live in the house for as along as they live). 

         

        Of course, all of that would only happen if you won something like the 240 M that is the Powerball today.  Believe me,  after tax, the 10M would not be worth doing a lot of planning for.  It just doesn't go that far these days. 

         

        As for a lot of the stuff he wrote how to avoid taxes....I wouldn't.  I would pay my 39% with pleasure.  The stress of trying to save a dime is how many people allow such a windfall to become a stressful problem. 

         

        Remember, lots of money does not build character....it reveals it.  If you are a jerk before you win a lot of money,  you are still going to be a jerk afterward.      If you are a genuine person of character, you will still be a genuine person of character...just with a lot more money!

         

        I am still wondering about the statement I read  (and I can't remember where) that said  "don't expect to pick up your lump sum and go deposit the check in your local bank."    They talked like only large banks have the "capacity" to handle say  a  50 million dollar deposit. 

         

        Here's to all of us having the pleasure of finding out for ourselves one day!!!

          John Ahern's avatar - cigar
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          Dayton/NJ
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          Posted: October 10, 2005, 9:28 am - IP Logged

          From what I understand from a lottery winner I know in NJ, at the time of your winning, you can set up anyone you want to receive any portion of your winnings you want. This particular winner took his payments over 20 years, but as he was 65 years old, he gave 10% of his winnings to each of his 5 kids, and kept 50% for himself. That way, the kids' 10% counts as THEIR income.


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            Posted: October 10, 2005, 10:47 am - IP Logged

            If the award is substantial, I would consult a tax attorney before making the designations regarding assignments to beneficiaries and gifts to charities.  Once you're in the top tax bracket, there's a phase-out of deductions and exemptions.  Per the Bush tax relief act of 2001, the deductions and exemptions phase out at the rate of 3 percent for every 1 percent in income once you reach the 35 percent income tax bracket.

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              Sparta, NJ
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              Posted: October 10, 2005, 12:29 pm - IP Logged

              Remember, lots of money does not build character....it reveals it.  If you are a jerk before you win a lot of money,  you are still going to be a jerk afterward.      If you are a genuine person of character, you will still be a genuine person of character...just with a lot more money!

              E-X-A-C-T-L-Y !  Huge amounts of money causes a spotlight to be illuminated.

              I am still wondering about the statement I read  (and I can't remember where) that said  "don't expect to pick up your lump sum and go deposit the check in your local bank."    They talked like only large banks have the "capacity" to handle say  a  50 million dollar deposit. 

              I think that is in reference that no state actually gives you a check. There is a money transfer involved. I would "assume" that transfer can go any where you choose. You have around 30-days to specify where it should go; thats where the lawyers and financial people come in. New Jersey keeps saying it takes 30-days. In the meantime, I would be at the bank working on a large loan; get away money.

              Cheers

              |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

              I only trust myself - and that's a questionable choice

                sirbrad's avatar - Lottery-062.jpg
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                Posted: October 10, 2005, 5:58 pm - IP Logged

                Thanks for the article, that was a long read, and quite an interesting read as well. I just wish there wasn't so much tax crap to worry about, as it is 'taxing' in itself. I don't know why they just don't leave you and your winnings alone, especially after beating such high odds. No one seems to care about all the money you spend and lose on the lottery however. But should you win, everyone jumps on the bandwagon for a piece of the pie. I would definitely start a few businesses that relay to my talents, and that in itself would be cause for some tax exemptions. But I would want to make sure those closest to me are set for life as well, and that their taxes are just that, "theirs."

                  sirbrad's avatar - Lottery-062.jpg
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                  Posted: October 10, 2005, 6:21 pm - IP Logged

                  "Many lottery winners, especially large prize winners, are often dismayed to learn that, even after their lottery prize is substantially reduced by income tax withholding, they may be required to pay additional income tax. Given the disparity between the 28% federal withholding rate and the 39.6% top marginal income tax rate for individual taxpayers, many large prize winners will have to pay more in income tax than the amount originally withheld."

                   

                  That is a little rediculous. Almost 70% paid in taxes?! Is that off the top, or by the year? No wonder people wait unti 100 million and over to play the jackpot lotteries. But that 100 million could easily mean only 20 million or less actually.

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                    Morrison, IL
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                    Posted: October 10, 2005, 9:31 pm - IP Logged

                      70% tax!?  I don't think so, unless you know a state that has a 30% state income tax rate.

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                      Sparta, NJ
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                      Posted: October 10, 2005, 9:54 pm - IP Logged

                      Since they were created, those little boys (and girls) have busy little creatures. Their sole purpose is to find things to tax, ways to tax, and to punish those who rebel. They do nothing else. They even pay their employees for being creative. They have more ways to tax you then you have ways to cook beef. You think the Government allows gambling so they can sit back and watch the winners on television?

                      A couple of $250M winners, and guess what, thats a half-a-billion taxable income! Die with the winnings, more tax. Buy something, more tax. Sell something, more tax. Give something away, more tax. Collect interest, more tax. Travel, more tax. Do nothing, more tax. Add up all the lesser winners, all over the country, over a year, and you're talking big mulla! Why not go after lottery winners? It is free money for them.

                      Cheers

                      |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                      I only trust myself - and that's a questionable choice

                        sirbrad's avatar - Lottery-062.jpg
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                        Posted: October 11, 2005, 1:14 am - IP Logged

                        Yea I may stop playing the lottery, it appears that I will go broke far more quickly!

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                          Posted: October 11, 2005, 9:06 am - IP Logged

                          $250M minus taxes, minus more taxes, minus additional taxes, and minus fees to help me pay taxes, results in tons of money I don't have now. The requirement, to pay pay those taxes outweighes not winning, thus not having to pay those taxes.

                          Please Almighty Lotto God, put me in a position of that burden. Give me a chance to prove my worth to you.

                          Cheers

                          |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                          I only trust myself - and that's a questionable choice

                            sirbrad's avatar - Lottery-062.jpg
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                            Posted: October 11, 2005, 7:12 pm - IP Logged

                            True that you will still have far more money than you ever would have made in a lifetime most likely, even getting taxed to the extreme. But it is still wrong, and very deceptive how they "over-inflate" jackpot amounts. Many do not know they will not actually be getting $240 million up front, they got to go read all the small print.