“AITA For Spending My Son’s Lottery Winnings Money?” (2024)

FAQs

How do you spend your lottery winnings? ›

A common recommendation is to put your money to work for you in a diversified portfolio that includes a mix of cash and cash-like instruments, such as certificates of deposit (CDs) and high-yield savings accounts; bonds from sources that include corporations, municipalities, and the federal government; funds that can ...

What kind of bank do lottery winners use? Lottery winners typically register an account with a private bank and use their resources such as private banking, fiduciary investments, and other financial services specifically geared for high-net-worth individuals. Is it better to take the annuity or lump sum lottery?

Your first annuity payment, or the single cash option payment, should arrive within six to eight weeks. There are generally no California state taxes for Lottery prizes, but we are required to withhold federal taxes.

1. Establish proof that it's your ticket. While signing the back of the ticket is one step a winner will want to take, Robert Pagliarini of Pacifica Wealth Advisors once told TODAY it would be smart to take another step in case you ever need to prove it's yours. “I would take a selfie with it,” he said.

An irrevocable trust is considered the best type when multiple individuals claim a single prize. These work well in situations such as workplace lottery pools. Irrevocable trusts allow the funds to be dispersed to each winner in the pool without relying on a single winner's honesty.

Lottery winnings, considered taxable income, are subject to both federal and state income taxes. The Internal Revenue Service (IRS) imposes a federal tax rate of 24%, and California's state income tax, with rates ranging from 1% to 13.3%, adds an additional layer of taxation.

Consult with a Tax Professional: Before you start doling out cash, get in touch with someone who can guide you through the tax implications. Set Up Trusts: For larger gifts, consider setting up trusts. It's like giving your money a blueprint for how you want it to be used and can provide some tax benefits.

“With a large amount of wealth comes the potential for threats to your personal safety. You might be a target of crime or scams,” he tweeted. “A security professional or firm can help protect you, your family and your assets.” An accountant is also an essential hire when you come into a large sum of money.

What to do if you win Mega Millions? ›

Winning the Mega Million jackpot creates the need for major financial planning, and you should not attempt this alone. You're going to want both a tax professional and financial advisor who can walk you through the implications of your two payout options: taking the lump sum or choosing an annuity.

“I honestly think most people are probably better off taking the annuity.” As mentioned, the annuity option means you'll receive a check every year with another, slightly larger portion of your lottery winnings. While that annual allowance may sound annoying to a newfound jackpot winner, it can also help protect you.

It is true that lottery annuities are generally guaranteed, backed by the state or insurance companies that issue them.

“Get a tax attorney and a tax accountant right off the bat and then a financial adviser,” says Azoury. “They'll work hand in hand to figure out the plan.” The plan will include which payout option to choose: An annuity option makes an initial annual payment followed by 29 annual payments.