Pennsylvanians should be aware of the regulations that apply to using an LLC or Trust to hold lottery earnings. The Powerball drawings are a widely popular topic, but many misconceptions about what winners can actually do with their money remain. The winner of the Powerball does not usually receive the $1.4 billion prize in a single lump sum. However, if the winner insists on a lump sum payment, it will be the much lower figure of $868 million. Once a payment has been made, the winner must also subtract state and income taxes, with the highest federal tax rate being 39.6 percent.
Lottery winners have to deal with monetary demands from more than just the government. Attempted theft is common and so is people asking for a share in the wealth. While some choose to hide their status as a winner, only six states allow total anonymity. Three additional states allow the winner to maintain anonymity if the funds are moved into a trust or limited liability company.
Hiding a lottery win may not be entirely possible in every state, but LLCs and trusts can provide a high level of anonymity. Trusts allow the winner to transfer interest from the ticket and appoint additional trustees to manage the rest of the winnings. Forming an LLC makes it possible to appoint a manager to handle the money and report to the IRS.
Lottery winners might wish to speak to a family law attorney before announcing their winnings to receive guidance. Trusts and LLCs provide shelter for lottery money, but there are still various legal, tax and privacy issues to address. Working with a lawyer may help the winner stay apprised of all relevant tax policies and restrictions on transferring the lottery earnings as well.