Claiming Lottery Winnings

Wednesday, February 7, 2007
Contributed by: James Wester

Having had the distinct pleasure of representing the Crump, Allen & Lewis General Partnership in collecting the January 9, 2007 Mega Millions jackpot advertised at $122 million (cash value $73,572,690), I thought it beneficial to share some advice for all of you future lottery winners out there. Needless to say, it was a great experience.

One of the first questions most people ask is why it would take from January 9, 2007 (the date of the drawing) until February 1, 2007 (the date of the actual claim)? Why wouldn't a claimant just immediately go make the claim? In this instance, the Texas weather with an ice storm in Austin and a subsequent snow storm in Amarillo played a part in delaying the claim. However, there are other good reasons why you should think, consult with professionals and plan before you act. While not an exhaustive list, here are some initial items to consider:

1. Secure the ticket. This is a personal preference, but you need to protect that valuable ticket. One way is to put it in a safety deposit box at a bank. You can read the stories of the various ways that winners have "secured" their ticket.

2. Retain legal and financial help. You now have something of potentially tremendous value. Getting an attorney, accountant and financial advisor can help you protect and/or maximize that value.

3. Tax Consequences. Understand that there are a variety of potential tax consequences. While every situation is dependent upon the facts, you need to understand the income tax consequences and potential gift tax consequences. The IRS currently requires Texas to withhold 25% of the winnings for taxes; however, you can expect that you may owe additional taxes.

4. Signing the ticket. The ticket is a "bearer instrument" and while you want to immediately sign the back of the ticket, please understand that how the ticket is signed can be very important based upon Texas only recognizing one claimant.

5. Secrecy. If you want to maintain secrecy initially, then only tell those that you absolutely have to tell and swear them to secrecy. Your lawyer should be one of those. As most lottery players know, the lottery typically immediately announces where and when the ticket was purchased. I wonder if that store could review their security tapes to determine who was standing at the counter at the exact second that the winning lottery ticket was purchased. If you walk back in that store after winning, you can probably answer this question.

6. Public Records. Understand that certain information you provide to the lottery may be available to the public. On the other hand, much of your personal information (other than your name and city and state of residence) is protected from disclosure.

7. Claim Process. As you would expect, the claim process is form intensive, meaning there are a variety of documents that you are going to need to claim your prize. The forms vary depending upon whether the prize is claimed as an individual or an entity.

8. Groups and Families. If you play with a group, it is advisable to have a written agreement in place to avoid issues and disputes. I realize most groups simply have a verbal agreement and would refer you to #2 above.

9. Timing. You will have a period of time to claim your winnings (Texas allows 180 days). Use your time wisely and prepare to make your claim - haste can make waste.

10. Other Issues. Your new-found wealth is going to provide you with many opportunities. You may need to consider estate planning. When and how much you give to others requires careful thought and analysis.

11. TLC. While it can stand for "tender loving care," I am referring to the Texas Lottery Commission. In our instance the TLC was very friendly, courteous and helpful and made the entire experience very enjoyable. They will educate you on publicity issues and any other areas of concern.

12. Unknowns. What you don't know is what can be the most dangerous. Take the time to learn what you need to know and consult with professionals that can help you. As we all know, "a stitch in time can save nine." Every situation is different and each one requires consideration of your unique circumstances. Consequently, you should consider taking whatever amount of time it takes to properly make your claim.

The foregoing are just some initial thoughts, but I hope they will encourage you to act wisely and seek the help and guidance you need.

Like most lawyers, I take the attorney/client privilege very seriously. While all of the information in this article has already been made public, I appreciate my client consenting to me publishing this article on our website.

If you are one of the lucky holders of a winning lottery ticket, I congratulate you on your good fortune. Please realize that the challenges that you now face may be new to you, but you have a wonderful opportunity to improve your life and the lives of those around you. Be a good steward and best of luck with your new wealth.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.