What happens to lottery winners?

I just thought of something.

When someone wins a state lottery, and they decide to take the monthly payments, what happens when the state is broke?

When someone takes the monthly payments, the state invests the amount into annuities . If the state is broke, and the stock market is loosing, how do they pay these people?

If I ever won this day in age, I would take the whole thing while I could get it!

Ama

I wondered the same thing. Which is why I have decided (for now) to only buy the Megamillions tickets, since they are not bankrupt yet. At least not all the states who participate.

reply to post by amatrine

Typically, the winnings are actually an annuity that is paid by a private company, after it receives the lump sum amount from the State.

Lottery funds come from the sales of the lottery tickets. The states that have lotteries do not pay winnings out of any state funds or taxes. They simply collect the sales funds of the tickets and those funds are what is used to pay winnings.

Doesnt matter if a state is broke of its own funds.


Cheers!!!!

reply to post by amatrine


About 15 years ago when the lottery here in VA. started to give the option of monthly payouts, or one lump sum.. I started thinking that the lump sum was a better way to go..

the only prob with that is, you only get part of the full "jackpot" depending on your tax deductions, you get roughly 1/3 of the total Jackpot.. I know some people who would rather get the whole "pot" minus taxes every year, than "lose" 2/3rds of it...


I personally would take the "loss" and go with the lump sum, at least I could "hide" enough that if the banks gov't etc could not cover what they owed me, I would have something...(also gives you the option to buy real material worth.. IE gold,silver, euros, or anything else that you may think can be used as money.)

I thought they just moved away to lottery Island.

seriously, a friend recently hit 18K on a 2 dollar scrafch ticket.

She walked with under 14K.
So I can submit they are taxed about 25% right away.

edit to add:

This reminds me. I haven't checked my mega millions tickets from last Tuesday.

If I am not back for awhile, you'll know why...

[edit on 1-2-2009 by imd12c4funn]

Originally posted by RFBurns
The states that have lotteries do not pay winnings out of any state funds or taxes. They simply collect the sales funds of the tickets and those funds are what is used to pay winnings.

This seems to make sense on the surface, but don't think for a minute that they won't pocket that money if they feel they "have" to. Tax refunds don't belong to them either, and they are keeping those. It would be as if you overpaid on an item in a store and went back in to collect the difference, and they said, "Sorry, we're not giving you your money back."

If they are willing to do that, why not keep the lottery money as well? In CA, half of the lottery money goes to education (supposedly). If the budget is in complete collapse, I believe they would refuse to pay out lump sum lottery payments. I would have even less confidence in annual payments, regardless of whether they are paid out through a private firm, especially with NAU right around the corner. I mean, in ten years, there might not be a United States, let alone a California.

That is what I am thinking. Governments are also known for over dipping.

The feds did it with social security, why not the states with the lottery funds.

In this state the lottery used to fund the roads. When it did you saw all kind of

construction going on an any given time. Now it goes to schools, but where is

the money? The schools here are are all loosing funding and the electives and

sports are all being dropped. Some have gone to 4 day weeks. It makes me

wonder.

We buy the PowerBall ticket twice a week. I keep telling God that we'd be good stewards of that money. But I guess he doesn't believe me because we never win.

My brother in law used to work for a state lottery. He said that the winner receives about 60% of the total amount with taxes taken out of that. So you are not losing 2/3's of the whole amount. He said you get a little over half the actual winning amount.

It makes me wonder how much longer the lottery will be going on? I don't doubt for a minute that the states would take out whatever money they "needed" to keep the state going. I am wondering if soon, it will all end as money will be taken under the guise of protecting our states interests.

You should plan on about 1/4 of the total if you take a lump sum.
!/2 of the total because you decided to take the lump, and 1/2 of that to Uncle Sam.
Thats for the multi million lotteries, which is all I play anymore, and only when it gets above 50 million.
I figure on a 50 million dollar win, I would probably walk away with 12-14 million after all is said and done.

I understand what you are saying.. and you are right you get approx 60% of the total "pot". so out of one hundred million you would get 60 million..then that is taxed, and depending on your tax situation you would end up with a bit over 30 to 36 million..

aprox. 1/3 of the original jackpot..
not exact cause each individual and state tax situations are diff. but a fairly good approximation..

reply to post by SideWynder


The lump sum is a better choice.. if your not going to waste it all (look up lottery winners who have been arrested for crimes after wasting all their winnings.. some funny stories).

The annuity is low interest and pays out over a long time.. great way to ensure you are taken care of for life. I personally would take the lump sum and invest like crazy, making the money grow at a much faster rate then the annuity.

Ah, or you could also take the lump sum and go to a private company and negotiate much higher interest returns on an annuity. (Over 1mil companies will negotiate the terms)

[edit on 2/2/2009 by Rockpuck]

Originally posted by Rockpuck
The lump sum is a better choice.. if your not going to waste it all (look up lottery winners who have been arrested for crimes after wasting all their winnings.. some funny stories).

Agreed, the lump sum is always the better choice. The winner can drop the lump sum into interest bearing accounts and collect the interest for life. In most cases, the interest will amount to about what the annuity payment does, PLUS at the end of the 30 years you still have the principle to pass on to the next generation.

The hard part is actually having the willpower to do the smart thing and not just blow it all on the "good life".