Participating in the lottery can be great fun, especially if you find yourself the lucky winner of a substantial amount of money. While you’ve been dreaming about what you’d do with that money, have you thought about how to split your lottery winnings with your family or co-workers?
You want to share, don’t you? Okay, okay, so the answer is maybe, but maybe not. There are some critical considerations when sharing lottery winnings with family, friends or co-workers.
But first…
Can you split your lottery winnings with your family?
Yes! After a big lottery win, you can share the money with your family. However, there are a few key points to consider:
- Decide if you want to share: This is a personal decision that only you can make and there is nothing wrong with keeping your winnings. But if you want to spread wealth, that’s good too.
- Get advice: Get advice from a professional, such as a real estate attorney or financial planner, before you dole out the cash. They can help you understand tax implications, legal issues and other factors related to your donations.
- Know Your Taxes: The same professionals (along with a certified public accountant) can help you understand what taxes you’ll pay so you can set aside enough money for tax season and avoid a surprise tax bill.
- Decide how to share: Will everyone get an equal share? Will those with greater financial need get a bigger piece of the pie? Or do you use some other factor to decide who gets how much? However you break it down, make your reasoning clear.
- Write it down: When you decide who gets what, write it down. (Yes, you may need to get a lawyer involved.) This will avoid any potential problems later.
- Consider trusts or annuities: If you don’t want family members to throw money around immediately, consider placing it in a trust or annuity for each member. This frees up cash at a predictable rate and ensures the money lasts.
- Be a great communicator: Be open and honest about the people you give money to, how much and why. Be able to explain your reasoning to avoid misunderstandings and regrets in the future.
How much is my lottery payout?
The amount of money you get after winning the lottery will be determined by a number of factors that may affect your decision on how to split your winnings:
- Payout options
- Tax consequences
Understanding payout options
When you win the top prize in the lottery, you may have two payout options: a lump sum or an annuity option.
It is important to consult with a professional who can help you decide which option is best for your unique situation. They can also help you decide how to deposit your winnings, be it in multiple bank accounts, investments and other ways.
Be tax savvy!
So it’s time to talk about the elephant in the room: taxes. You don’t want to do all the work of splitting the lottery winnings with your family, only to have everyone pay more in taxes. You cannot donate money to others to try to avoid paying taxes on winnings. In fact, if you donate enough, you can pay even more in taxes! This is called gift tax.
You can donate up to $18,000 per person per year without paying gift tax. If you are married, you and your spouse can donate up to $18,000 each to one person, for a total of $36,000 per person per year. In addition to the annual gift tax limit, there is a lifetime limit of $13.61 million per person in gifted funds.*
There are additional rules regarding gift taxes and we recommend that you speak with your tax advisor.
*Current for 2024. Take note! We are not tax experts. For official information about lottery winnings and your federal and state taxes, check the gambling income rules set forth at IRS.gov, your state’s IRS, and contact a CPA or tax attorney.
Lottery funds: sharing lottery winnings with associates
Did your work lottery fund just win the top prize? Woo-hoo! Have you set the rules in advance for who claims the money and how it is distributed? No? Well, let’s find out how to split lottery winnings with co-workers.
You want to avoid contention in case your group wins. So have a designated manager responsible for collecting money (electronic means is better than cash because there is a record!) and copying and distributing ticket images. (You can also play as a group in Jackpocket Pool, and it’s all done in the app for you!).
This leader should also be the holder of a contract that you should have written in advance, stating what will happen if you win. The contract will also state which games they will order tickets for and who will be the representative on the lottery committee to receive the winnings. You will also need to decide as a group whether to take the lump sum or annuity option if you win. Everyone involved in the contract should sign it.
All this information is useless unless you order tickets. Jackpocket makes ordering tickets a breeze, even when you’re joining the lottery fun with co-workers or friends. Just download the app (or visit us online!), create an account and set up your fund to get started. Whether it’s a public or private pool, you’re off to the races! Everyone who is invited to the pool has the opportunity to donate and you order tickets when you are ready!
