The Powerball lottery is quite a phenomenon in the United States. Ordinary people have the opportunity to win extraordinary sums of money, even though the odds are extremely slim.
Many of us have imagined winning this type of jackpot. We formulate all kinds of plans regarding what we would do if we were to come into this kind of money.
One thing that few people would think about would be the estate planning implications.
Recently a record-setting Powerball jackpot of over $590 million was won. This figure is what the winner gets if he or she accepts annuity payments over 30 years. The lump sum payout is almost $371 million. After federal income tax has been deducted the remainder would be $278 million.
When you’re talking about this kind of money it can all seem like a fantasy, but if you take the lump sum after taxes have been taken out you are left with less than half of the supposed value of the jackpot.
Then you have to consider the estate tax. If you were to get into a fatal automobile accident as you drove away from the lottery office with your winnings in hand the estate tax would be applicable.
Right now there is a $5.25 million estate tax exclusion. So if you had $278 million, almost $273 million would be subject to the estate tax. At the present time the maximum rate of the federal estate tax is 40%, so your heirs would be forced to part with 40% of this newly found family fortune.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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