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Why is it beneficial to collect a lottery jackpot as a LLC?

Topic closed. 38 replies. Last post 8 years ago by cc63.

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San Diego, CA
United States
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February 12, 2008
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Posted: May 15, 2008, 8:18 pm - IP Logged

I have seen this posted by many people in different threads, but without any type of explanation why this is the case.  What are the benefits of doing this or is everyone just talking out of their ass?

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    NY
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    October 16, 2005
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    Posted: May 15, 2008, 9:06 pm - IP Logged

    I'm assuming that most people who think they should claim as an LLC are confused about what that means.  There's a lot to be said for forming a corporation to deal with your assets after winning, but I don't see any advantage to claiming it as a corporation. Claiming as a trust, OTOH,  can have definite advantages, especially if the state only releases the name of the trust, or the trust's lawyer. Some of the basic info about the trust will be a public record, but not the details of who is a beneficiary. A corporation won't do that much to protect the owners from public exposure or scrutiny. 

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      San Diego, CA
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      Posted: May 15, 2008, 9:15 pm - IP Logged

      I'm assuming that most people who think they should claim as an LLC are confused about what that means.  There's a lot to be said for forming a corporation to deal with your assets after winning, but I don't see any advantage to claiming it as a corporation. Claiming as a trust, OTOH,  can have definite advantages, especially if the state only releases the name of the trust, or the trust's lawyer. Some of the basic info about the trust will be a public record, but not the details of who is a beneficiary. A corporation won't do that much to protect the owners from public exposure or scrutiny. 

      "Claiming as a trust, OTOH,  can have definite advantages"

       

      Besides annonymity, what are the other advantages?

        DC81's avatar - batman39
        MI
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        Posted: May 15, 2008, 9:33 pm - IP Logged

        Forming a LLC for your assets can be done as a form of protection of assets, specifically from lawsuits, especially frivolous ones, something a trust won't really do, an LLC gives you a bit of protection I think. It's a rather popular thing to do, especially using Nevada as a base where the laws more friendly to asset protection compared to most other states.

        You can't predict random.

          DC81's avatar - batman39
          MI
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          Posted: May 15, 2008, 10:10 pm - IP Logged

          It probably won't fully protect you all that much though if you get a big judgement against you, but Nevada does allow to do form a LLC without an actual business behind it. It might be too complicated for what it's worth so maybe going the Trust route would be better. But eh, this is something you should work out with a lawyer when you're getting everything ready. There's certainly many factors that aren't even touched upon with all our "daydreaming". Just don't let on that you have a lot of money and that might be at least somewhat good enough to protect you from people trying to make a quick buck, personal liability insurance may be useful too.

           

          As for attorneys, I'd say that if they have several big clients, then they must be doing something right. Well, unless those clients include the Mafia. But then again......

          You can't predict random.

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            San Diego, CA
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            Posted: May 15, 2008, 10:30 pm - IP Logged

            Can creating a trust circumvent the gift tax laws when giving away money?  I know this is all daydreaming stuff, but why not throw this stuff around.  There is a lot less important daydreaming crap on this board.

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              Pittsburgh, PA
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              February 21, 2008
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              Posted: May 16, 2008, 12:05 am - IP Logged

              I've also pondered this question and have always wondered if you could claim the ticket in form of a "percentage pool" to avoid being double taxed.  For example if my ticket won, it would be a lot better if I could claim 90%, my parents claim 5%, and my brother claim 5%.  This would be my way of giving money away without being subjected to gift taxes. 

              I don't even know if this is allowed because I've never heard of it being done this way.  But I guess if you would do this, you might as well set up a LLC and just assign the ownership percentages before claiming.  From my observations, a lot of rich people set up an LLC(s) to hold most of their assets and an a Trust for ownership of property.  Don't ask me why they do this, but they do for some good reason I'm sure. 

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                Kentucky
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                February 14, 2006
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                Posted: May 16, 2008, 7:47 pm - IP Logged

                I've also pondered this question and have always wondered if you could claim the ticket in form of a "percentage pool" to avoid being double taxed.  For example if my ticket won, it would be a lot better if I could claim 90%, my parents claim 5%, and my brother claim 5%.  This would be my way of giving money away without being subjected to gift taxes. 

                I don't even know if this is allowed because I've never heard of it being done this way.  But I guess if you would do this, you might as well set up a LLC and just assign the ownership percentages before claiming.  From my observations, a lot of rich people set up an LLC(s) to hold most of their assets and an a Trust for ownership of property.  Don't ask me why they do this, but they do for some good reason I'm sure. 

                There was a large jackpot winner from Michigan that said he would give some of his co-workers each a $1 million. The current cash value of Mega Millions is $119 million and it would be easy if we could designate a $1 million each be deducted and given to Joe, Bob, and Pete and/or 5% to your parents and brother.  The best would be if we could hand the lottery a list of deductions, each paying their own tax, and be done with it, but lotteries won't let us do that.

                One size does not fit all with the legal options and we would have to shop around so that be more difficult. I'm willing to trade a headache for $119 million.


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                  Posted: May 16, 2008, 9:20 pm - IP Logged

                  There was a large jackpot winner from Michigan that said he would give some of his co-workers each a $1 million. The current cash value of Mega Millions is $119 million and it would be easy if we could designate a $1 million each be deducted and given to Joe, Bob, and Pete and/or 5% to your parents and brother.  The best would be if we could hand the lottery a list of deductions, each paying their own tax, and be done with it, but lotteries won't let us do that.

                  One size does not fit all with the legal options and we would have to shop around so that be more difficult. I'm willing to trade a headache for $119 million.

                  It matter not one iota what the lotteries will or won't allow.  They have zero influence on taxes. Z-E-R-O!  The lottery only passes out the money, they don't tax it. You do the paperwork up front and uncle doesn't care either.  Just so it is legal (in the eyes of the government) and they get every thing that is owed them. Every thing is the key phrase.  If there is a pre-dated document itemizing who gets what (percentage or actuals) the tax man will be happy to tell you what he wants from you. 

                  I think it is a huge waste of monery for some one in their 70's or 80's to claim huge jackpots ($97M?) in their own name.  They will soon die, and the tax man will get huge percentages as death tax (thank you Bill Clinton!) and inheritance taxes.  Better to have your children claim the jackpot and have a written agreement with the children to give you money through a trust (or something similar).  My duaghter would be very happy with $90M, and I would be very happy with $7M. Then again, I trust my children not to kill me for the money, unlike some parnoids! 

                    tntea's avatar - Lottery-059.jpg

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                    Posted: May 17, 2008, 10:37 am - IP Logged

                    good for lottery pools

                         OLD/Vtrac   Lottery Bible         Double Warnings      Thumbs Up TN F34/F44

                      savagegoose's avatar - ProfilePho
                      adelaide sa
                      Australia
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                      Posted: May 17, 2008, 1:29 pm - IP Logged

                      im sure the gov does care. say u decided to go percentages, say u decided that a load of children in your state needed a college fund. say you divided your wining up, into umm i dunno the max earnings before you had to pay pax. sau u won 1 mil land max u can earn b4 tax is payed is $10k.  thgen ythat would be 100 kids. so in your super generous act, u claim the jackpot in the name of 100 needy children. this ensuring they all claim the tax free threshold.

                       

                      but the feds getting zilch in way of lottery tax!

                       

                      im pretty sure the gov would soon care how the jackpot is divided, and may even enact laws to make sure no one screws them again this way.

                       

                      but i digress, who in the world is gonna find 100 worthy people to split lotto winnings with? and thats just 1 mill, 100 mill jackpot you'll need 100 times that 10k people!

                      i doubt you could fit 100  names on the back of a ticket, never mind 10k names.

                      2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

                      keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297


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                        Posted: May 17, 2008, 5:39 pm - IP Logged

                        Why are people obessessed with merging the state lottery director into both the state tax collector and the United States Internal Revenue Service?  The lottery ticket is not a tax form and was never intended to be. The state Lottery Director is not part of any tax collection agency, and was never intended to be.  Federal taxes are required on all gambling winnings.  When you report those winnings, and those winnings are part of a lottery, you will not be required to submit the lottery ticket.  Therefore, the number of names on a lottery ticket mean nothing.

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                          NY
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                          October 16, 2005
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                          Posted: May 18, 2008, 12:08 am - IP Logged

                          I've also pondered this question and have always wondered if you could claim the ticket in form of a "percentage pool" to avoid being double taxed.  For example if my ticket won, it would be a lot better if I could claim 90%, my parents claim 5%, and my brother claim 5%.  This would be my way of giving money away without being subjected to gift taxes. 

                          I don't even know if this is allowed because I've never heard of it being done this way.  But I guess if you would do this, you might as well set up a LLC and just assign the ownership percentages before claiming.  From my observations, a lot of rich people set up an LLC(s) to hold most of their assets and an a Trust for ownership of property.  Don't ask me why they do this, but they do for some good reason I'm sure. 

                          If your ticket wins and you give shares to anyone, you've made gifts of a significant amount of money and  can expect to owe a gift tax. If, OTOH, you give shares of a ticket that hasn't won, the gift has minimal value, and won't result in owing gift taxes. If you present a winning ticket and claim that you own most of it and your parents or siblings own small shares you'd better be able to prove that the gift was made before the ticket became a winning ticket. Without that proof the IRS will assme that you made substantial gifts after winning  a large amount of money.

                          You could certainly set up an LLC and claim through that, but it won't protect you. If ownership isn't established before a ticket becomes a winner, then you've still got the IRS' assumption that there is only one owner who made gifts after they won. An LLC won't protect your assets, either.  An LLC only protects the members against personal liability for the actions of the LLC.  If you created an LLC to build houses and  the LLC was sued because it built a house that collapsed and killed somebody, the LLC would have liability, but the members of the LLC would not.  If the LLC owned the assets from a lottery prize those assets would be subject to a judgement. OTOH, if  a member of the LLC caused a car accident and was sued, any assets of that member might be awarded to the claimant.

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                            NY
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                            Posted: May 18, 2008, 12:11 am - IP Logged

                            It matter not one iota what the lotteries will or won't allow.  They have zero influence on taxes. Z-E-R-O!  The lottery only passes out the money, they don't tax it. You do the paperwork up front and uncle doesn't care either.  Just so it is legal (in the eyes of the government) and they get every thing that is owed them. Every thing is the key phrase.  If there is a pre-dated document itemizing who gets what (percentage or actuals) the tax man will be happy to tell you what he wants from you. 

                            I think it is a huge waste of monery for some one in their 70's or 80's to claim huge jackpots ($97M?) in their own name.  They will soon die, and the tax man will get huge percentages as death tax (thank you Bill Clinton!) and inheritance taxes.  Better to have your children claim the jackpot and have a written agreement with the children to give you money through a trust (or something similar).  My duaghter would be very happy with $90M, and I would be very happy with $7M. Then again, I trust my children not to kill me for the money, unlike some parnoids! 

                            "If there is a pre-dated document itemizing who gets what (percentage or actuals)"

                            How can you give somebody an actual amount of money before you've won the money? The only way to avoid  making  a sizable gift of a lottery prize is to make a gift of a share in the ticket before it becomes a winning ticket.

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                              NY
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                              Posted: May 18, 2008, 12:14 am - IP Logged

                              "Claiming as a trust, OTOH,  can have definite advantages"

                               

                              Besides annonymity, what are the other advantages?

                              For starters, a trust can protect your assets from lawsuits and estate taxes, as well as avoiding probate.