Blind Trusts For Lottery Jackpots

If you win the lottery, you probably want to tell everyone. But that’s a risky move. The more people who know you’re a multimillionaire, the more likely you are to get scammed or even be victimized by jealous friends and family members. That’s why some winners hire attorneys to set up blind trusts that protect their privacy while allowing them to claim their prize.

Generally, when you’re the winner of a large jackpot, the prize money is paid out in either a lump sum or an annuity. Lump sums are a one-time payment, while annuities offer annual payments that grow over the course of decades. Unless you’re in the midst of a record-setting interest rate boom, an annuity payout typically comes closer to the advertised jackpot than a lump sum.

But before you decide whether to take the annuity or lump sum option, consider the tax impact. Lottery agencies are required to withhold 24% of all winnings over $5,000 for taxes, and that can leave a significant gap between the withholding and the amount you ultimately owe, depending on your tax bracket.