WOW!!! I Just Won the LOTTERY: Now What DO I DO? - advice for lottery winners

USA Today (Society for the Advancement of Education), Nov, 2000 by Jack R. Fay

If you make the correct decisions, you can sit back, relax, and really enjoy the rest of your life.

MOST PEOPLE have never had the experience of winning the lottery and probably never will. Millions refuse to buy a lottery ticket, and their chances of winning, of course, are nil. Millions of others buy tickets every week or on a less frequent basis, and their chances of winning are almost nil, considering the odds of matching their ticket with the winning numbers (one to 80,089,128 on the Powerball, for example). Nevertheless, there are winners every day, and very big winners many times a year.

Lotteries continue to remain very popular throughout the U.S. Currently. 37 states and Washington, D.C., have lotteries, and several other states are considering adopting them. Lotteries extend over the continents of Asia, Australia, Europe, and Africa, and are also in Latin America and Canada. The first multinational lottery, the Viking Lotto, was introduced in 1992 with the five Scandinavian countries as participants.

Powerball, which is played in 20 states and Washington, D.C., had its first drawing in West Des Moines, Iowa, on Apr. 22, 1992. The drawing is still held at the Same time (10:59 p.m.) every Wednesday and Saturday night at the same place (except at remote locations several times during the year). The largest jackpot in the history of the U.S. and the world so far was in a Powerball game, with an annuitized amount of $295,000,000 and a cash amount of $161,000,000.

Before a drawing, you should put your purchased tickets in a safe place and not forget to check the numbers after it. There have been many instances where lottery participants have lost their tickets or ruined them in the clothes washer. Lottery officials will not authenticate a winner without the complete winning ticket, no matter how many witnesses there may be or the fact that the participant always plays the same numbers. Amazingly, the Powerball lottery has had many unclaimed $100,000 prizes since 1992. The officials for Powerball estimate that 30% of the $1 prizes and about 12% of all prizes go unclaimed. Apparently, a significant number of people lose or misplace their tickets, forget to check the winning numbers, or--hard as it may be to believe--do not want to bother to collect their winnings.

Now that you have checked your numbers and are convinced that you are a big winner, what next? Protect your ticket. Place it in an envelope and seal it. Assuming that you do not plan to go immediately to the necessary headquarters to stake your claim, you should hide the winning ticket in a very secretive location, but don't forget where you stashed it. Putting the ticket in a safe deposit box in a bank would undoubtedly be a wise idea.

Even though you will be very excited and want to tell everyone you know, it is extremely important not to tell anyone (other than possibly your spouse or best friend--someone whom you can thoroughly trust). Especially do not tell anyone from the media, at least not before lottery officials have certified that your ticket was a winning one.

Before you take your ticket to the lottery headquarters, you should consider the possibility of setting up a trust at a bank or other financial institution. You could either go directly to the trust department of the bank or hire an attorney to help set up the trust. More will be discussed later in this article concerning a trust to be used for receiving the lottery proceeds.

Depending on various state rules, a winner usually has from a 180-day to one-year claim period. It may be crucial for a winning ticket-holder to know what the time limit is in his or her state to contact the lottery headquarters (assuming the winner plans to hold the ticket for awhile) and make sure the ticket is turned in and verified within the claim period. It often takes at least two weeks after verification before the winner actually receives a check.

Generally, the lottery winner has already made a decision on whether to take the winnings in one lump-sum payment (at a discounted amount) or on an annuity basis (usually over a 20-year period) when the player purchased the ticket. In some lotteries, the winner makes the decision on whether to collect the winnings in one current amount or over a period of time after he or she has turned in the ticket to the proper officials. The advantage of choosing the payment method before the drawing (assuming that is required or chosen if an option) is that it prevents the IRS from applying the "constructive receipt" rule to the winnings. If the constructive receipt principle is applicable in situations in which a winning lottery player has the option of taking the prize immediately or spreading it out over a number of future payments, the winner is deemed to have received the entire prize in the current year. By requiring the player to choose the payment method before the drawing, the lottery can avoid the constructive receipt rule, as the early choice is considered to have a substantial limitation or restriction on the control of the income (assuming the annuity payments are selected), according to 26 Internal Revenue Code section 1.451-2.