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splitting the jackpot prize with family members.

Topic closed. 27 replies. Last post 9 years ago by KY Floyd.

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Entertaiment Capital
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Posted: August 13, 2007, 1:14 am - IP Logged

 Let's pretend that I won the current Megamillion jackpot. :D

 I want to have my parents retired and provide some financial nesteggs for my sisters. But I have no intention to pay gift taxes or split the jackpot prize equally with my family members. Well, for example I'd buy some houses under my name and have my parents and sisters live there for free, but won't give them houses as a gift since I have to pay that damn gift tax, which is about 37% of the value of the gift.

 Someone in a previous thread mentioned that if you claim the prize with multiple winners you don't have to split the prize equally. That means that I can get about 80% of the prize and have my parents have 15% of the prize and each sister gets 2.5% of the prize. Of course I am buying the houses for them, under my name. (and don't hate me for taking 80% of cash value prize. I am putting most of my share into IRA and income solution and donate to charity OUT OF dividend income, and help my friends with the incomes too.)

 But I really wonder if that can be applied to CA prize. I live in California and I have no idea if I can claim the prize that way.

    RJOh's avatar - chipmunk
    mid-Ohio
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    Posted: August 13, 2007, 1:23 am - IP Logged

    "Let's pretend that I won the current Megamillion jackpot. :D "

    Get real, if you really wanted to help your parents, you wouldn't wait until you won a lottery jackpot.

     * you don't need to buy more tickets, just buy a winning ticket * 
       
                 Evil Looking       

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      NY
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      October 16, 2005
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      Posted: August 13, 2007, 2:09 am - IP Logged

      The lottery rules in your state don't matter. You can split a prize any way you want to, because it's your prize. The only difference is whether the lottery writes multiple checks or if  they give you one check and leave it to you to give others their share.

      If you don't want to  pay gift taxes, don't give away gifts that are worth a lot of money. That means giving them a share of the ticket, rather than the prize. Better still, split the cost of the ticket so that their share isn't even a gift. When you actually collect the winnings you should expect that the IRS will want proof that the others already owned shares of the ticket before it became a winning ticket. If you don't have a written agreement that predates the drawing, plan on paying gift taxes after you've already paid the income tax on the full value of the prize. You should also expect that the IRS will want proof that the agreement predates the drawing. Just because you write "July 15, 2007" on something doesn't mean the agreement wasn't written on July 21st. A court may rule in your favor based on testimony that  you intended to share the ticket (or maybe even based on an LP post  that is archived), but a formal, written agreement would be safer.

      As long as you're concerned about gift taxes, how do you feel about estate taxes? Giving 15% of the current MM cash value to your parents could make their estate worth close to $7 million.  Even if they're only 40 they could still be hit by a bus walking out of the lottery office after collecting the prize. If their estate was worth $7 million the IRS would get a large chunk before the remainder goes to their heirs. Since you're presumably one of the heirs, some of the money you gave them would come back, minus the cut taken by the IRS. That seems pretty silly to me.

      That's why I would never give such a large share to my parents. If I wanted them to benefit I'd give them a smaller share and then I could give them a gift each year. If I'm married my spouse could also give them a gift, allowing us to make a combined gift of $44,000. They wouldn't have to pay income tax and we wouldn't have to pay gift taxes. If I had two sisters I could give them a slightly bigger share and they could make similar gifts. You could then potentially give your parents as much as $132,000 each year with no  gift taxes, and no estate tax before getting the moneyback if/when your parents die.

      Buying a house and letting somebody else live there can involve some serious  risk for anyone. For a lottery winner it would be truly foolish.  Suppose your sister is living in your house and she throws a party. Her friend drinks a bunch of wine. The wine you gave your sister as ahousewarming present. Then she falls off of the deck and becomes a quadraplegic who is unable to work and provide care for her 4 young children who don't have a father. She decides to sue and the lawyer looks for some deep pockets. Who do you supose has the deepest pockets around?Wouldn't it be better to give your sisters 3% each and let them buy their own houses?

        AuntiePat's avatar - animaniacs10
        Just outside of Cleveland, OH
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        Posted: August 14, 2007, 4:53 pm - IP Logged

        The lottery rules in your state don't matter. You can split a prize any way you want to, because it's your prize. The only difference is whether the lottery writes multiple checks or if  they give you one check and leave it to you to give others their share.

        If you don't want to  pay gift taxes, don't give away gifts that are worth a lot of money. That means giving them a share of the ticket, rather than the prize. Better still, split the cost of the ticket so that their share isn't even a gift. When you actually collect the winnings you should expect that the IRS will want proof that the others already owned shares of the ticket before it became a winning ticket. If you don't have a written agreement that predates the drawing, plan on paying gift taxes after you've already paid the income tax on the full value of the prize. You should also expect that the IRS will want proof that the agreement predates the drawing. Just because you write "July 15, 2007" on something doesn't mean the agreement wasn't written on July 21st. A court may rule in your favor based on testimony that  you intended to share the ticket (or maybe even based on an LP post  that is archived), but a formal, written agreement would be safer.

        As long as you're concerned about gift taxes, how do you feel about estate taxes? Giving 15% of the current MM cash value to your parents could make their estate worth close to $7 million.  Even if they're only 40 they could still be hit by a bus walking out of the lottery office after collecting the prize. If their estate was worth $7 million the IRS would get a large chunk before the remainder goes to their heirs. Since you're presumably one of the heirs, some of the money you gave them would come back, minus the cut taken by the IRS. That seems pretty silly to me.

        That's why I would never give such a large share to my parents. If I wanted them to benefit I'd give them a smaller share and then I could give them a gift each year. If I'm married my spouse could also give them a gift, allowing us to make a combined gift of $44,000. They wouldn't have to pay income tax and we wouldn't have to pay gift taxes. If I had two sisters I could give them a slightly bigger share and they could make similar gifts. You could then potentially give your parents as much as $132,000 each year with no  gift taxes, and no estate tax before getting the moneyback if/when your parents die.

        Buying a house and letting somebody else live there can involve some serious  risk for anyone. For a lottery winner it would be truly foolish.  Suppose your sister is living in your house and she throws a party. Her friend drinks a bunch of wine. The wine you gave your sister as ahousewarming present. Then she falls off of the deck and becomes a quadraplegic who is unable to work and provide care for her 4 young children who don't have a father. She decides to sue and the lawyer looks for some deep pockets. Who do you supose has the deepest pockets around?Wouldn't it be better to give your sisters 3% each and let them buy their own houses?

        OOps--this answered a question I had in reply to a similar question on another posting--so I'm NOT trying to be redundant in what I said and you really do have some info for me that I had wondered about.  Only one thing, Floyd. . .could you please recheck your sources for the figure of $44,000.  What I had read is that the current law allows a yearly gift of $12,000/person per gifter--so you and your wife could gift a total of $24,000  to your mother and $24,000 to your father for a total of $48,000 from one married couple to another, and then a similar amount to your sisters but, I believe, only if they have reached the age of majority--otherwise, if underage,  they are included in your parents' share.  Also these are ALL subject to the Lifetime Umbrella Exclusion which allows you to either gift up to $1,000,000/person during your lifetime before a gift tax has to be paid on it  or the same amount to be left to them to inherit from you after you pass.  After that exclusion, either Gift or Inheritance taxes (depending on the conveyance--of course, a well planned Trust would change all that) would kick in.  .  .kinda makes one feel a little tight in their shorts as thought the gov't were squeezing them by the 'nads.

        When I started this quest to read up and milk family members for info on taxes/ gifts/  jackpot lottery winnings, I really was very naive about my gov't and their generation of revenue through taxes on the wealthy (since the odds are that at my age and health--I shall probably never have to worry about it), but I've become somewhat disillusioned bout it--don't get me wrong--should lightning strike and I would win a large jackpot--there would be no objections--until realizing that I could NOT use this JP while alive and then pass it to my heirs without the gov't getting as large a portion as they do.  Just doesn't seem fair somehow.

          Uff Da!'s avatar - InCelebration 001.jpg
          Washington State
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          Posted: August 14, 2007, 5:53 pm - IP Logged

          Comments please.  My SO has been out of town recently looking for work and when he does find work again, I suspect it will be some distance away so we will only see each other periodically.  So I wrote the email below to myself at a different email address so the dates shown on the complete header would show when it had been sent and received.  (My SO does not have his own computer, and besides I wouldn't want to trust someone else to keep the record which could potentially affect my taxes.) 

          I will be purchasing Mega Millions tickets periodically in the upcoming months.  During (name)'s unemployment and/or absence, one-fifth of the purchase price of the tickets is to be considered to be a gift from me to him and the tickets are to be considered a “pool” of the two of us in that proportion, even though he is unable (due to finances or to location) during those weeks to contribute to the purchase.  Thus, in the event of a large or small win, winnings will be shared in a 20% to 80% proportion and each of us will be responsible for the taxes on our portion just as though he had contributed one-fifth of the purchase price from his own earnings rather from gift money from me.

          Any recommendations for a change in wording?  Anything important I omitted?  Would a different method be better in showing the date of the intent rather than by using email headers to do it?  I realize that any answers cannot be construed as legal advice and that I'll have to take my chances on the accuracy, but I'm not about to pay an attorney for advice on something with as low a probability as a jackpot lottery.

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: August 14, 2007, 6:04 pm - IP Logged

            Uff Da.  Anything you write means very little unless you have it notarized while you are signing the document.  Next time you 2 are together, just type up an agreement and then go to your local bank and ask someone there to notarize it while you both sign.  (It's free.  I just had a pile of papers notarized.) Otherwise it IS a gift.

            I also would not mention that he isn't contributing to the price of the ticket.  For all anyone knows, he left you enough to cover the price of MM tickets for a year.  I'm not saying to lie, but it's really nobody's business.  There is a difference between being dishonest and volunteering unsolicited information.

              Uff Da!'s avatar - InCelebration 001.jpg
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              Posted: August 14, 2007, 6:16 pm - IP Logged

              Uff Da.  Anything you write means very little unless you have it notarized while you are signing the document.  Next time you 2 are together, just type up an agreement and then go to your local bank and ask someone there to notarize it while you both sign.  (It's free.  I just had a pile of papers notarized.) Otherwise it IS a gift.

              I also would not mention that he isn't contributing to the price of the ticket.  For all anyone knows, he left you enough to cover the price of MM tickets for a year.  I'm not saying to lie, but it's really nobody's business.  There is a difference between being dishonest and volunteering unsolicited information.

              Unfortunately, going to a local bank together will not work for tonight's drawing or likely for the next several week's drawings.  So what do I do in the meantime?

                psykomo's avatar - animal shark.jpg

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                Posted: August 14, 2007, 7:31 pm - IP Logged

                "Let's pretend that I won the current Megamillion jackpot. :D "

                Get real, if you really wanted to help your parents, you wouldn't wait until you won a lottery jackpot.

                Let's get "really REAL"..............

                get off your cheap mental BLOCH and pay a tax man to handle YOUR CRAP

                or..................GO STRAIT to JAIL>>>with no get-out CARD!!!!!!!

                >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>Party................................No Pity!Puke

                  justxploring's avatar - villiarna
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                  Posted: August 15, 2007, 1:19 am - IP Logged

                  Uff Da, since I am not an attorney, I was only repeating what's been told to me about writing a will or other official document.  However, since you sent yourself an email it's possible it would be accepted.  I have no idea if the IRS would accept an email. 

                  RJOh writes:  Get real, if you really wanted to help your parents, you wouldn't wait until you won a lottery jackpot.

                  I would agree, but how do you know he/she can afford to help them now? I do see what you are saying, however.  Even after my sister lost her job and was living on her social security check, she asked me if I needed money last year when my car died and my tooth exploded in the same month. I used my credit card instead, but it was still a nice offer.  

                    guesser's avatar - Lottery-017.jpg

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                    Posted: August 15, 2007, 10:33 am - IP Logged

                    Comments please.  My SO has been out of town recently looking for work and when he does find work again, I suspect it will be some distance away so we will only see each other periodically.  So I wrote the email below to myself at a different email address so the dates shown on the complete header would show when it had been sent and received.  (My SO does not have his own computer, and besides I wouldn't want to trust someone else to keep the record which could potentially affect my taxes.) 

                    I will be purchasing Mega Millions tickets periodically in the upcoming months.  During (name)'s unemployment and/or absence, one-fifth of the purchase price of the tickets is to be considered to be a gift from me to him and the tickets are to be considered a “pool” of the two of us in that proportion, even though he is unable (due to finances or to location) during those weeks to contribute to the purchase.  Thus, in the event of a large or small win, winnings will be shared in a 20% to 80% proportion and each of us will be responsible for the taxes on our portion just as though he had contributed one-fifth of the purchase price from his own earnings rather from gift money from me.

                    Any recommendations for a change in wording?  Anything important I omitted?  Would a different method be better in showing the date of the intent rather than by using email headers to do it?  I realize that any answers cannot be construed as legal advice and that I'll have to take my chances on the accuracy, but I'm not about to pay an attorney for advice on something with as low a probability as a jackpot lottery.

                    My comments: You are nuts.

                    IF - WHAT IF - this 'document' is deemed legal somehow, and he's in another city, finds someone else, and dumps you ?

                    You just committed to giving him a chunk of money, but unless you two are married, he can take the money and run - with someone else.

                    And whatever you do, do NOT say 'that won't happen'.  I'm not saying it will, but it could, and that's all it takes. Money changes EVERYTHING.

                    If it was me, I would not committ to anything.

                    PS - I can doctor an e-mail and make it look like it came from George Bush at the White House, if you like, complete with IP and MAC addresses.

                    I don't mean to rain on your parade, but just wait until you win before you do anything 'legal'.  

                      Uff Da!'s avatar - InCelebration 001.jpg
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                      Posted: August 15, 2007, 11:59 am - IP Logged

                      guesser said:

                      PS - I can doctor an e-mail and make it look like it came from George Bush at the White House, if you like, complete with IP and MAC addresses.

                      I realize an email can be doctored as to where it came from.  But can it be doctored as to the dates that it goes through the ISP?  I didn't think so, but I obviously am not that familiar with computers.  It is the dates that would be of interest to the IRS.

                      As to splitting any win with my SO, at my age, I'll take my chances.  Big Smile  We are far from being kids and I'd still have 80% according to this "document," far more than I could imagine using in my lifetime, including gifts to relatives and charities.   (Hint: I've been retired for 14 years.)  Obviously if we should part ways before any win, the agreement would be cancelled.  Should we part ways after a win, it would still be as friends.  We were friends first anyway.  With younger people or a different situation, I can see your point, though.

                        guesser's avatar - Lottery-017.jpg

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                        Posted: August 15, 2007, 11:31 pm - IP Logged

                        guesser said:

                        PS - I can doctor an e-mail and make it look like it came from George Bush at the White House, if you like, complete with IP and MAC addresses.

                        I realize an email can be doctored as to where it came from.  But can it be doctored as to the dates that it goes through the ISP?  I didn't think so, but I obviously am not that familiar with computers.  It is the dates that would be of interest to the IRS.

                        As to splitting any win with my SO, at my age, I'll take my chances.  Big Smile  We are far from being kids and I'd still have 80% according to this "document," far more than I could imagine using in my lifetime, including gifts to relatives and charities.   (Hint: I've been retired for 14 years.)  Obviously if we should part ways before any win, the agreement would be cancelled.  Should we part ways after a win, it would still be as friends.  We were friends first anyway.  With younger people or a different situation, I can see your point, though.

                        The situation you described (date/time stamp through the routers and bridges) would be argued by 'which' e-mail came through at those times, you can only argue 'an' e-mail came through at a certain date/time.  I can also clone a mail server/router/MAC address to reflect any one I know about, as long as I have the numbers/addresses, I can clone it.

                        But you get my drift, I'll stop now, all I am saying is it CAN be done, not that it would be done.

                         

                        As far as the 'obvious' part goes: not unless it's in writing.

                        I'm not trying to be negative in this or any other post where I cast doubt: it's just that I've see soooo many things fall apart, and folks not covering their behinds, soooo many folks saying 'that won't happen', yet, it does.

                        Lastly, I'm not far away from retirement myself. 

                          Avatar
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                          Posted: August 16, 2007, 1:36 am - IP Logged

                          My comments: You are nuts.

                          IF - WHAT IF - this 'document' is deemed legal somehow, and he's in another city, finds someone else, and dumps you ?

                          You just committed to giving him a chunk of money, but unless you two are married, he can take the money and run - with someone else.

                          And whatever you do, do NOT say 'that won't happen'.  I'm not saying it will, but it could, and that's all it takes. Money changes EVERYTHING.

                          If it was me, I would not committ to anything.

                          PS - I can doctor an e-mail and make it look like it came from George Bush at the White House, if you like, complete with IP and MAC addresses.

                          I don't mean to rain on your parade, but just wait until you win before you do anything 'legal'.  

                          The stuff about spoofing email headers is correct, and relying on an email would definitely be a bad idea. The rest is poor advice.

                          As Uff Da notes,  the agreement can be canceled at any time by either party. Of course  they may need to prove that the agreement was canceled and when it was canceled, so if things fell apart a few days after winning a jackpot it could be messy. The easiest solution would be to simply keep the documentation yourself. Since that's what Uff da is doing there is no risk. If the other party doesn't have a copy all they have is a story to tell, if they even know.You can easily draft a document like Uff Da's that says that each time you buy a lottery ticket you will be giving an n% interest in the ticket to some other person.

                          I would agree that there's no point in bothering with some legal matters before winning  because the chances of winning a jackpot are far too slim to justify spending money consulting a lawyer about what to do if you were to win. Creating a document that  demonstrates a pre-existing intent to share ownership of lottery tickets doesn't require a lawyer. Not all banks will notarize a document for free, but it's cheap enough. If you were to win a jackpot the few bucks could easily save millions in gift taxes, and thousands in legal fees.

                          I think JustEx's comment could be misinterpreted, so here's some basic info about having something notarized. What you write doesn't mean any more or less depending on whether or not it has been notarized. A Notary doesn't verify any claims or information in a document and they don't make any judgements about the legality of the document. Having it notarized only provides proof that the signature and date are authentic. The notary is simply a formal witness to the signing of the document.

                           

                          Auntie Pat: Yes, it should be 48 grand. I guess I was living in the past when I said 44.


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                            Posted: August 16, 2007, 7:11 pm - IP Logged


                            If I win a MM or CA SLP jackpot, I would let my family decide how to split the money.


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                              Posted: August 16, 2007, 7:32 pm - IP Logged

                              "Let's pretend that I won the current Megamillion jackpot. :D "

                              Get real, if you really wanted to help your parents, you wouldn't wait until you won a lottery jackpot.

                              Not everyone is capable of providing a retirement for their parents, unless they are making a lot of money.

                              I think that the majority of people on this site aren't in that position. I'm sure a good percentage help out in any way they can, but not on the scale the poster intended. Atleast that's the way I interpreted it....ololloloolol