July 19, 2016 | Author: Cara Matthews | Category: N/A
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Winners’ Handbook Introduction Congratulations! You are a New York Lottery jackpot winner, a prize coveted by millions of players who share the same love for the games that you do. You now have the financial capability to make different choices about the direction you want your life to take. You have won the chance to translate dreams into reality in a way that may not have been possible before. You join a long line of players with the good fortune of winning a big New York Lottery jackpot prize. Winning that big jackpot brings big responsibilities for you and your family. With proper, competent and expert advice in dealing with these issues, you can open doors to so many wonderful new opportunities. This booklet focuses on some of the concerns you may have. It seeks to define, in general terms, the areas where you might be best served by seeking competent and qualified advice. Keep in mind professional advisors will give their opinions, but the final decisions rest with you. We recommend you speak with more than one advisor before forming your judgments.
Rev 5/2010 1
Winners’ Handbook Your Lottery Prize What exactly is my prize? If you won a Lotto, Mega Millions or Powerball jackpot, the prize you have won (or willll share) h is a multi-million l ll dollar jackpot prize. You will be given more information when you claim your prize. Lotto: Your Lotto jackpot prize will be paid according to the choice you made at the time you purchased your ticket. Lotto jackpot prizes will be paid in one lump sum cash payment equal to the current cash value of the advertised jackpot or in 26 annual payments over 25 years. Lotto jackpot payments are graduated payments, increasing in value each year. Mega Millions: Mega Millions will be paid according to the choice you made when purchasing your ticket and will be paid in one lump sum cash payment equal to the current cash value of the advertised jackpot or in 26 annual payments over 25 years. Mega Millions jackpot payments are paid in equal payments annually. Powerball: You will have 60 days from the date you become entitled to a Powerball jackpot prize to decide if you want to receive your jackpot prize in one lump sum cash payment. Winners who choose the annual payments option in Powerball will be paid in 30 payments over 29 years. Powerball annual jackpot payments are graduated payments, increasing in value each year. Sweet Million: A Sweet Million jackpot prize of $1,000,000, will be paid in one cash payment of $1,000,000 (before applicable taxes). Instant Games: The payment methods of Instant Game jackpot prizes vary greatly. Some games offer a single payment of the jackpot prize while others may be paid annually or quarterly over several years or for the life of the prize winner. For each instant game, prizes are paid in accordance with the game’s rules. Please refer to our website www.nylottery.org to see how a particular instant game jackpot prize is paid.
When will I receive my prize money? If you are to receive annual payments, your annual payments will continue each year around the anniversary of your win. Quarterly payments are paid in February, May, August and November of each year. For your protection, the Lottery requires all prize payments to be electronically transferred into your account at your financial institution. An “Authorization for Deposit” form will be provided to you at the time you claim your prize. Once you have completed this form and returned it to the Lottery’s Prize Payment Office, your lump sum payment or initial installment payment will be transferred to your account after your media announcement. 2
You will receive a Certificate of Term Payment which outlines your specific payment plan along with a payment schedule at that time.
How much will my payment be? The payment will vary depending on the game. The money that will be available to you almost immediately is the amount of the initial installment payment or lump sum payment less applicable taxes.
I might like to share my prize with my family or friends. Does that affect how I claim my prize? We recommend that you entrust your winning ticket to the Lottery immediately by submitting your prize claim in the individual or group capacity you think best fits your needs. Then, if you have any doubts or questions, consult your own advisors before the first prize installment or lump sum payment is paid to you. If you decide that you wish to change your claim from an individual claim to a group claim, or vice-versa, we will allow you to withdraw your original claim and submit a new one – as long as you do so before the first prize installment or lump sum payment has been made. After the first prize installment or lump sum payment has been made, the prize is considered to have been legally awarded and the Lottery cannot change the identity of the winner without court approval. If there is no plan to share the prize, it should be claimed individually. However, some winners anticipate sharing the prize with relatives or other persons, when they have purchased the winning ticket together and agreed to share any prizes they win. In this case, it is possible for one person to claim the prize individually and then distribute shares to the other members of the group, but such an approach means that the Lottery will report the entire prize and all the withholding taxes in the name of the individual receiving the payments. That can cause problems for all concerned when annual tax returns are due because it will not be clear which members of the group are responsible for reporting taxable income and which members are entitled to credit for the withholding taxes. The Lottery can pay a group of 2 to 10 people individually and provide each person with an IRS form W-2G, Statement For Certain Gambling Winnings, for their portions of the prize. When the prize is to be shared by a group of more than 10 people, the best approach is for the group to create a formal organization such as a trust, a partnership, or a corporation. If an organization claims a prize, the group must obtain a separate taxpayer identification number (called a “Federal Employer Identification Number” or “FEIN”) from the Internal Revenue Service and submit that number with the prize claim so that it can be used by the Lottery to report the taxes withheld. When the organization receives the lottery prize installments, the Lottery pays the prize in the name of the trust, partnership or organization to a group representa3
Winners’ Handbook tive who in turn is responsible for paying each member of the group their portions of the prize and providing each member with a Form W-2G for tax reporting purposes.. The decision on whether to claim as an individual or as a group is important because of the income and tax accounting implications and because once a prize has been awarded the Lottery cannot change the identity of the prize winner without a court order. If there is any possibility of sharing the prize, it is recommended that you seek advice from an attorney, an accountant, or both before finalizing your prize claim. Any questions you or your advisors have about this issue should be directed to the Lottery’s Prize Payment Office.
Can a lien be filed against my winnings? Judgment liens, tax levies or offsets may be filed against your prize winnings by creditors or government agencies for payment of your debts. Any such offsets will be deducted from your prize payments and the remainder, if any, will be sent to you. The lien, levy or offset may continue from year to year until the debt is paid in full.
Tax Issues Do I have to pay taxes on my winnings? Under Federal law, the Lottery is required to withhold federal and New York state income taxes at the applicable rates from each jackpot prize payment. In addition, the Lottery is also required to withhold New York City or City of Yonkers income taxes when applicable. You should be aware that the tax the Lottery is required to withhold may not satisfy your entire tax liability. Exactly how much your income tax will be each year depends on such factors as your family size, your financial resources, and other income which determine what you as a private citizen pay in income taxes. Tax laws are extremely complicated and are continually changing. The Lottery recommends that you seek advice in this area from a professional tax accountant, attorney, or financial planner. These professionals can create trusts for your assets which can provide future financial independence for family members and children. You may want to consult a tax professional shortly after your media announcement to ensure you are prepared when filing your tax return. For further information concerning tax responsibilities see Publication 140-W at www.nystax.gov. 4
Seeking Advice What kind of advice should I seek? You need trusted and competent advice in many areas: financial planning, legal, tax, and investment to name a few. Be sure the advisor has professional expertise in the areas of service you need. Ask for references from the advisors as well as recommendations from people you know. There are many avenues of investment, and to a novice investor they can all appear confusing. A brokerage company is licensed and can provide diversified investment advice on stocks, bonds, or mutual funds. Banks and brokerage houses also offer a wide range of financial services, among them the establishment of trust and financial accounts tailored to your specific needs. Financial institutions can help prepare a detailed analysis of your future goals and income requirements and assist you in developing a long-term investment plan. Be aware that you may become the target of unscrupulous people looking to exploit your good fortune. These people could be lawyers, accountants or even relatives. The best first step is to talk to someone you have known for a long time, someone you trust and know, who will have your best interests in mind. It could be a trusted friend or close relative, perhaps a religious leader, or anyone who can recommend a lawyer or an accountant or an advisor who you can trust.
Publicity Will the fact that I’ve won be announced publicly? Lottery policy has always been to release only the name and city of residence of each winner to the news media. Since the Lottery is a government agency and Lottery prizes are public funds, it is our responsibility to inform all of our players just like you, of Lottery winners and prizes. Therefore, we must require jackpot winners to participate in a media event arranged by the Lottery. We owe it to everyone to disclose the names of all winners to protect the integrity of the Lottery. For your protection, the Lottery maintains a policy of not releasing personal information such as street addresses or phone numbers to anyone. That’s up to you. Even so, once the media find out the name and city/ borough of residence of a winner, they are active in seeking out the details regarding the identity of the jackpot winner. That’s because you are now a celebrity of sorts and reports of large winners are ‘newsworthy’ and 5
Winners’ Handbook usually good fun news stories. Viewers, listeners and readers like to learn more about you and become confident that they have a chance to win a prize too. A media event is advantageous to you as a winner because it allows you to answer all reporters’ questions at one time.
What can I expect at a news conference/media event? There is bound to be media interest in you because you have beaten long odds to become a Lottery millionaire. The questions you can expect at a news conference include: How did you choose your numbers or ticket? What do you plan to do with the money? How did you find out that you were a winner? Where did you buy your ticket? What was your first reaction? What is your occupation? Will you continue to work? Do you have a family? Lottery staff members always attend our news conferences and assist you in any way you would like. Our advice is to get yourself a scrapbook, a tape recorder, or a camcorder and preserve the memories of this exciting time of your life. The Lottery may be able to assist you by providing copies of newspaper, radio and television reports, so ask us for them if you wish.
Future Considerations Can I assign my future payments to someone else, such as a bank or another individual? Only after receipt of an appropriate court order is the Lottery allowed to pay your payments to any other individual or entity.
If I want to receive a lump sum payment instead of waiting 20 years or more for my entire prize, can I arrange for it? The Lottery may offer you the option of a lump sum payment at the time of claiming your prize. Once you have chosen to receive your prize through a lump sum payment or annually over a period of time, the Lottery cannot change your selection. If you choose to receive your prize annually over a period of time, there may be some investors or companies who would be interested in arranging a transfer of your right to future prize 6
installments in exchange for paying you a lump sum. Be aware that companies may contact you offering to purchase some or all of your installment payments for a fee. Please know that the New York Lottery does not endorse any of these “buy out” companies or disclose personal information about prize winners. New York State Law requires that you seek independent financial and legal advice before making any payment assignment decision. Since the Lottery can pay the future installments to a person or entity other than you only when authorized by a court, the amount of any lump sum you receive may be reduced by the cost of obtaining the court order. You should also be aware that receiving a lump sum payment may have adverse legal and tax consequences.
What should I do if there are any changes to my address, etc? You should always keep the Lottery informed of your current address. With your first payment, you will receive a form known as a “Change of Winner Status” Form. During the course of your prize payment of annual or quarterly installments, if your address, name or U.S. residency status should change, please notify the Lottery Prize Payment Office immediately, using the “Change of Winner Status Form” provided by the Lottery. For your convenience, we will automatically send a copy of this form to you at the time of each payment. If you have any questions regarding your prize payment installments, please feel free to contact the Lottery Prize Payment Office at
[email protected] or the phone number listed on the next page of this manual.
What happens if I die within the prize payment period? In the event of your death, any remaining payments will be paid to your estate. Since the remaining installments due on your prize will be paid to your estate, the estate representative should provide written notification to the Lottery in the event of your death. A certified copy of your Death Certificate and a certified copy of a Certificate of Letters Testamentary or a Certificate of Letters of Administration must be submitted along with the notification of your death. You are urged to execute a Will and to name an estate representative. You now have an important new asset – your Lottery prize. Your estate now includes the unpaid portion of your prize in addition to all your other assets. That means that it is important for you to have a Will. If you do have one, you should review it to make sure that it expresses how you want the remainder of your payments to be distributed after your death. 7
Winners’ Handbook If you die without a Will, the distribution of your assets will be made according to law, and it is possible that the distribution might not be in accord with your actual wishes. You are urged, therefore, to execute a Will reflecting your wishes as to how you want your estate distributed.
Can my estate receive all the remaining prize payments at once? Under Lottery regulations, prize payments are not accelerated upon the winner’s death. Payments will continue to be made to your estate until the total amount of the prize is paid unless a court having jurisdiction over your estate orders the Lottery to do otherwise, such as making payments directly to the estate’s beneficiaries.
What about taxes after I die? It is important to consult with an attorney about the implications your Lottery prize will have on estate and inheritance taxes in the event of death. It is a complex situation, and how you can handle it will depend a great deal on your personal circumstances. Federal and State estate and inheritance tax laws differ in some important respects. However, in one way they are the same: Upon death, all assets are valued at their present value at the time of death and applicable taxes may be assessed on them. A lottery prize is an asset. Even though the income from the lottery prize may not be received all at once, the prize has a present value. Along with all other assets, the present value of the lottery prize is determined by considering the total amount of the prize which has not yet been received and the interest rates currently prevailing in the marketplace. This information can be provided to your attorney or estate representative by contacting the Lottery’s Prize Payment Office. To avoid any tax problems, it is best to plan ahead for the estate taxes that may be due on your prize.
Who do I call if I have any questions? The Lottery does not offer financial or legal advice, but will be happy to provide you with any information we can. Prize Payment Office: (518) 388-3370
[email protected] General Counsel’s Office: (518) 388-3408 Press and Community Relations Office: (518) 388-3415 NYS State Department of Taxation & Finance: www.nystax.gov Internal Revenue Service: www.irs.gov 8
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