Can you use a blind trust for lottery winnings?
Blind trusts are legal asset management structures that can help lottery winners control their money earned and maintain a certain level of privacy. In 2010, the $261.6 million Powerball Lottery jackpot went unclaimed for a month until an attorney showed up to claim the prize on behalf of his anonymous client.
What kind of trust is best for lottery winnings?
The irrevocable trust has advantages for lottery winners in that all assets transferred into the trust no longer belong to you. Although you lose control over the trust after creating it, you provide instructions to the trustee on how to manage money and assets in the trust.
Should I set up a trust if I win the lottery?
Even if you claim lottery winnings in your own name, you can put the assets into your new trust. Doing so may have several advantages, including avoiding probate court when you pass away and potential protection from creditors, depending on state law and the trust’s provisions.
Why do lottery winners use trusts?
Set up a trust. Most state lotteries are required to release your name and where you live, but many allow you to maintain some privacy by claiming the proceeds through a trust. A trust can put a barrier between you and the onslaught of relatives, friends, and strangers who will want your money.
How is a blind trust taxed?
Like all other types of trusts, blind trusts can either be set up as pass-through entities or can be taxed at the trust level, with the money to pay the taxes coming out of the trust. Either way, the owner/beneficiary ultimately foots the tax bill for the investment income generated by the trust assets.
What is a blind trust and how does it work?
A blind trust is a trust established by the owner (or trustor) giving another party (the trustee) full control of the trust. The trustee has full discretion over the assets and investments while being charged with managing the assets and any income generated in the trust.
Are Blind trusts effective?
These trusts are designed to prevent conflicts of interest and maintain privacy. Blind trusts are most beneficial to people who require objectivity in their business or political roles, but they are also suitable for people who want to maintain a high level of privacy regarding their assets.
How does a blind trust work?
What is the point of a blind trust?
Blind trusts are generally used when a trust creator (sometimes called a settlor, trustor, grantor, or donor) wishes for the beneficiary to be unaware of the specific assets in the trust, such as to avoid conflict of interest between the beneficiary and the investments.
How do blind trust work for lottery winners?
A blind trust can act as the agent of the grantor when handling a sensitive financial matter, such as a winning lottery ticket. You set up a trust by creating a document, known as a deed of trust, that names the trustee who will be handling the assets and dealing with the beneficiaries who will receive them.
How do you create a blind trust?
In general though, the steps to set up a blind trust are as follows: Gather the documentation for the assets that you want put into the blind trust. Appoint a trustee. Create the trust agreement. Sign the trust and have it notarized, taking care to follow any recording laws that your state has. Officially transfer the relevant assets into the trust.
What kinds of trusts are available to lottery winners?
Many lottery winners wonder whether they should establish a trust for their winnings. The revocable trust and the blind trust are two options commonly used by lottery winners.
Can you put lottery winnings in a trust fund?
Although there are benefits to setting up a trust fund in which to store your winnings, it won’t reduce your tax bill. Although you can quickly establish a trust fund to store your lottery winnings, this will not exempt you from any tax responsibilities established by state and federal governments.