From
Geraldine Williams, who worked on after her retirement to make ends meet, won the $294m prize in a multi-state draw in the US.
"I can't believe it's me," she told a news conference.
Her award will be reduced to $117.6m after taxes, but Mrs Williams said she planned to share it with her children and some charities, and to travel."
That's a 60% tax rate!
Top federal rate, plus her state's tax, and maybe a city income tax too. Plus gift tax on whatever she gives away. She should have bought the ticket in a pool with her family. Federal gift tax is 48% top rate.
In the UK they tax the stake; in the USA they tax that plus they tax the winnings. In the UK there is a Potentially Exempt Transfer. In the USA there is no such thing.
Bitstring , from the wonderful person Tam said
Plus most (all?) US lotteries NEVER pay out a lump sum .. what she actually won was probably 6m$/year for 49 years or similar. Just another way they can get benefit from the stake money.
With some internet scams that are doing the rounds now, you pay the "tax" and never receive any winnings at all.
That reduces both the tax and the cost to the lottery.
Remarkably, there have been numerous (I don't know how many but I believe it to be several dozen) lottery winners who have filed for bankruptcy. In some states (Florida comes to mind) annuities over four years old (and hence not fraudulent transfers under local law) are exempt in bankruptcy. In most they are not.
Of course most people in the USA, as in the UK, are advised by incompetents. Or all such bankruptcies would be filed in Florida, since people can file wherever they have lived for the past 91 days, and it's not too expensive to live in a Florida trailer park.
Do they purchase an annuity, or are you reliant on the lottery organisation being solvent for the next 49 years?
Jim.
They purchase an annuity. They have to fix the cost of the winning and move on. But bear in mind, it's not an annuity for life: it's an annuity for a fixed number of years, heritable.
Bitstring , from the wonderful person Jim Ley said
An annuity, generally. However the cost (and NPV) and a 49 year $6m/year annuity is a lot (lot!) less than $294m (depending on inflation and interest rate expectations).
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