Suzanne Mullins used her lottery winnings as collateral for a loan in 1998
Eleven years after becoming a millionaire through the lottery, a Roanoke, Virginia woman has seen her fortune turn to debt.
A circuit court judge ruled last week that Suzanne Mullins owes $154,146.50 in defaulted payments to a Florida company that gave her a loan six years ago with her lottery winnings as collateral.
It seems an unlikely outcome for someone who once purchased a lottery ticket worth $4.2 million.
But as with others who have won the lottery, Mullins soon discovered the win is no guarantee against future bad luck and unforeseen circumstances.
"It's not security," said Mullins' attorney Michael Hart. "A lot of times, it causes more problems than it solves."
Mullins declined to comment. She referred questions to Hart, who attributed her financial problems in part to the lengthy illness of a son-in-law who died in 2000, leaving medical bills in excess of $1 million with no health insurance. In the midst of that ordeal, other bills began to pile up.
"It's been a hard road," Hart said of his client's life since winning the lottery. "It's not been jet plane trips to the Bahamas."
In January 1993, Mullins bought a lottery ticket at a Grandin Road convenience store that matched all six numbers in the state's Lotto drawing. At the time, Mullins said she planned to split the $4.2 million jackpot three ways with her husband, Tommy, and her daughter, Susan. After taxes, Suzanne Mullins' share worked out to 20 annual payments of $47,778.84.
As money got tight, Mullins decided in 1998 to take out a loan with People's Lottery Foundation, a company with the financial niche of serving lottery winners who need their money faster than the annual payments can arrive. The foundation lent Mullins $197,746.15, which she agreed to pay back with her yearly checks from the Virginia lottery through 2006.
Then, when lottery rules changed in 2000 to allow winners to collect their money in a lump sum, Mullins decided to cash in on the remaining amount. She did not make any more payments on the loan after February 2001, according to a lawsuit filed by Singer Asset Finance Co., a Delaware company that was assigned the note from People's Lottery Foundation.
Her decision to cash in on her winnings was a "flagrant and intentional violation of her duties and obligations" under the loan agreement, the lawsuit stated.
A judge ruled in Singer Asset's favor last year, leaving only the amount of damages to be decided. At a hearing Tuesday, Judge Jonathan Apgar set the amount at $154,146.50. By applying an interest rate of 12 percent, six points less than what Singer had asked for, Apgar reduced a sum that could have exceeded $230,000.
Hart declined to comment on Mullins' current financial situation or her ability to pay the judgment. Mark Kidd, the attorney who represented Singer Asset Finance Co., said his understanding is that Mullins has no assets.
At a news conference several days after they won the lottery, the Mullins family did not seem to be on the verge of a spending spree. Tommy Mullins said he planned to keep his job, and the only possible purchase mentioned was a new car for Susan Mullins.
It's not that unusual for people to go broke after winning the lottery, according to Tom Nasta of Personal Financial Planning in Roanoke. Nasta said he once had a client who won $1 million and had only a mobile home to show for it within seven years.
"People have a false sense of how much the money is," Nasta said. "Taxes are a big hit."
And for those who elect to take annual payments, the tendency is often to spend with the total figure in mind while losing track of their current cash flow.
Of course, that's just a problem for the lucky ones who win: Most lottery players never hit the elusive jackpot.
"It's a form of hope," Nasta said, "but the odds are so stacked against you."
Another case study in what not to do if you win. You can't do anything about illnesses or medical expenses, but you can do something about dealing with predators like "People's Lottery Foundation", belatedly taking the lump sum and then defaulting once you realize what a fix you got involved in.
$47,000 a year for 20 years is what seems like a "borderline" amount to me. It seems to be enough to quit your job, but it really isn't - if you do you are just replacing job income with lottery income, then paying for health insurance yourself, and worse, you have the illusion of all this money in the bank and you have all day to spend and get into trouble. And then in 20 years, you could easily end up broke unless you lived frugally and invested carefully over the years. I think I'd need $100,000 a year for 20 years before I felt comfortable quitting my job.
Can someone tell me about the taxes on lottery? For instance, if you 3million, you pay federal and state taxes and then you decide to invest the money which will you give a return of 3%. Do you continue to pay taxes on the money that you invested and the return ? Thank you.
Yes, you would have to pay taxes on income made by investments, but not on the original money you invested, since you already paid taxes on that.
>Can someone tell me about the taxes on lottery? For instance, if you 3million, you pay federal and state taxes and then you decide to invest the money which will you give a return of 3%. Do you continue to pay taxes on the money that you invested and the return ? Thank you.
a middle aged person can get a single health insurance policy from top notch companies with a high $7,500 annual deductible and a (more than adequate) coverage total of around $4,000,000.00 for about $75-$100 (or even less) per month in premiums. this would have seemed perfect for her and her son-in-law since they could easily pay the first $7,500 per year in fees. unless it was a unique prior illness of her son-in-law that prdvented him from getting insurance...i can't understand why they didn't have basic high deductible coverage for less than $1000 per year? it would have completely protected the lotto winnings from the huge drain of unexpected medical bills beyond the $7,500 (+ a small co-payment) each year. i am not judging her string of bad-luck life situations following her lotto win, but it's strange that 'someone' didn't advise her family on protecting their winnings with basics such as increased health and vastly increased auto liability coverage...something all lottery recipients must consider.
The story is murky on why the son in law had $1 million in medical bills in 2003 when they won the lottery in 1993. Did they not care to buy insurance they could easily afford? Why didn't they pool their winnings to pay the bills? Like going to the loan company, it seems like another example of their lack of brainpower. It's very seldom bad luck alone that brings lottery winners down - it takes some stupidity too.
I doubt I would quit working for anything less than $4,200,000 AFTER taxes... I may work closer to home or take a lower paying job doing what I like, but I would work for the health insurance, AND the max contribution (company matched) to the 401k...
The MINIMUM amount for not working...
1. Pay off ALL debts and replace aging vehicles with RELIABLE transportation and get the kids hooked up for any college they want (no Ferraris in the mix)... $ varies by personal situation... for Me, about $310,000 (with 2 new vehicles AND 3 full rides for the kids to 4 year colleges)...
2. The "comfort" salary... implies no increase in lifestyle spending, just enough to continue with a few benefits (home improvements vs. new home, etc...) $50,000 per year + 3% increase... to last until retirement age (24.5 years for me) Total cost... $1,822,963.22 This will not count the interest earned on that principal over the years... that stays there as a retirement "bonus"...
3. Paying for the "golden years"... $2,000,000 set aside to be invested in long term municipal bonds for retirement... will mesh nicely with the 401k...
simple plan and total value is $4,152,963.22 ... anything over that is icing... then the PARTY starts...
One thing lottery players should realize is, Big companies always promise what can never be given to you without ripping you off some way or the other.I think the best thing to ever do is take a lumpsum payment of whatever your windfall is and invest wisely.Do not rely on Lawyers or financials advisers to manage you asset cuz all they're ever do isgoing to enrich themselves and not you.Had she taken cash over annuity,she wouldn't had come crashing down so early.I have seen cases where people start investment on little of nothing and watch it grow into thousands of dollars without financial advisors."A hint to the wise is quite sufficient".
This kind of story makes the news because they are lottery winners. People use up their savings everyday in this country for those unexpected emergencies . It could be a small amount or a large amount from saving for years and years. Get wiped out in a skinny minute.
These stories go untold in the news media.
Another case study in what not to do if you win. You can't do anything about illnesses or medical expenses, but you can do something about dealing with predators like "People's Lottery Foundation", belatedly taking the lump sum and then defaulting once you realize what a fix you got involved in.
$47,000 a year for 20 years is what seems like a "borderline" amount to me. It seems to be enough to quit your job, but it really isn't - if you do you are just replacing job income with lottery income, then paying for health insurance yourself, and worse, you have the illusion of all this money in the bank and you have all day to spend and get into trouble. And then in 20 years, you could easily end up broke unless you lived frugally and invested carefully over the years. I think I'd need $100,000 a year for 20 years before I felt comfortable quitting my job.
Yes, you would have to pay taxes on income made by investments, but not on the original money you invested, since you already paid taxes on that.
>Can someone tell me about the taxes on lottery? For instance, if you 3million, you pay federal and state taxes and then you decide to invest the money which will you give a return of 3%. Do you continue to pay taxes on the money that you invested and the return ? Thank you.
There was no cash option in Virginia in 1993.
a middle aged person can get a single health insurance policy from top notch companies with a high $7,500 annual deductible and a (more than adequate) coverage total of around $4,000,000.00 for about $75-$100 (or even less) per month in premiums. this would have seemed perfect for her and her son-in-law since they could easily pay the first $7,500 per year in fees. unless it was a unique prior illness of her son-in-law that prdvented him from getting insurance...i can't understand why they didn't have basic high deductible coverage for less than $1000 per year? it would have completely protected the lotto winnings from the huge drain of unexpected medical bills beyond the $7,500 (+ a small co-payment) each year. i am not judging her string of bad-luck life situations following her lotto win, but it's strange that 'someone' didn't advise her family on protecting their winnings with basics such as increased health and vastly increased auto liability coverage...something all lottery recipients must consider.
The story is murky on why the son in law had $1 million in medical bills in 2003 when they won the lottery in 1993. Did they not care to buy insurance they could easily afford? Why didn't they pool their winnings to pay the bills? Like going to the loan company, it seems like another example of their lack of brainpower. It's very seldom bad luck alone that brings lottery winners down - it takes some stupidity too.
it just goes to show you that there's no such thing as financial security.
I doubt I would quit working for anything less than $4,200,000 AFTER taxes... I may work closer to home or take a lower paying job doing what I like, but I would work for the health insurance, AND the max contribution (company matched) to the 401k...
The MINIMUM amount for not working...
1. Pay off ALL debts and replace aging vehicles with RELIABLE transportation and get the kids hooked up for any college they want (no Ferraris in the mix)... $ varies by personal situation... for Me, about $310,000 (with 2 new vehicles AND 3 full rides for the kids to 4 year colleges)...
2. The "comfort" salary... implies no increase in lifestyle spending, just enough to continue with a few benefits (home improvements vs. new home, etc...) $50,000 per year + 3% increase... to last until retirement age (24.5 years for me) Total cost... $1,822,963.22 This will not count the interest earned on that principal over the years... that stays there as a retirement "bonus"...
3. Paying for the "golden years"... $2,000,000 set aside to be invested in long term municipal bonds for retirement... will mesh nicely with the 401k...
simple plan and total value is $4,152,963.22 ... anything over that is icing... then the PARTY starts...
One thing lottery players should realize is, Big companies always promise what can never be given to you without ripping you off some way or the other.I think the best thing to ever do is take a lumpsum payment of whatever your windfall is and invest wisely.Do not rely on Lawyers or financials advisers to manage you asset cuz all they're ever do isgoing to enrich themselves and not you.Had she taken cash over annuity,she wouldn't had come crashing down so early.I have seen cases where people start investment on little of nothing and watch it grow into thousands of dollars without financial advisors."A hint to the wise is quite sufficient".
mayan:
There was no cash option when she "won".
This kind of story makes the news because they are lottery winners. People use up their savings everyday in this country for those unexpected emergencies . It could be a small amount or a large amount from saving for years and years. Get wiped out in a skinny minute.
These stories go untold in the news media.