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Old 06-20-2014, 08:18 AM
 
Location: Southlake. Don't judge me.
2,809 posts, read 3,564,894 times
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Quote:
Originally Posted by City Guy997S View Post
Great plan but........ If you gift any single person over $14,000 you have to pay a 50% tax. So give you favorite uncle 1mm and you owe the IRS $493,000, ironically he owes nothing.
Er, that's wildly incorrect. There's a small nugget of truth buried in there (the 14K annual exclusion), but beyond that it's a whole lotta wrong. Sorry.
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Old 06-20-2014, 09:15 AM
 
2,079 posts, read 2,475,773 times
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maybe a couple mil to charity, invest the rest and move to a secluded location....travel too. might quit the full-time job and get something part time

everybody else can suck it.
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Old 06-20-2014, 09:52 AM
 
898 posts, read 654,966 times
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For all of us hopeful lottery winners, here is a paraphrase of what I've read that one should do if one wins a big lottery, (or any lottery.)

1. Shhhh! Don't tell anyone, except a spouse, and swear them to secrecy for a while. Go to work, don't let on that anything out of the ordinary happened. Act like everything is normal for about three weeks. Your head will be racing a million miles an hour. Take time to chill.

2. Cash in the ticket. I would see if I could establish a trust and have the trust collect the prize. If my state is one that requires I collect publically, I'm going to get dressed in a 80s big hair wig, owl sunglasses, stiletto heals and build myself up to a DD bosom, and tight dress. No one will recognize me! LOL

3. Assemble the team to handle finances. Lawyer, accountant, estate planner, and require that they work as a team and be accountable to each other.

4. The job. Iv'e read that you might want to keep job your but your job will quit you. You won't be getting a raise, promotion, and the co-workers might just freeze you out. After all, you don't need to work anymore. Give your two weeks notice.

5. Move. The bloodsuckers will come out of the woodwork. If you want to build a mansion, move into something modest while the mansion is being built. Just get away from your old address. Change your phone number too.

6. Continue to keep a low profile for awhile. They say don't make any major lifestyle changes for six months. If your car is dying, don't get a Rolls Royce, get a Toyota. Sudden, flashy displays of new money will attract the wrong kind of attention. But...

7. Ok, we're human. Give yourself some money to blow. Say, $100,000, while youre in your six month time out and making more long-term plans.

8. Don't fall for get rich(er) quick schemes. Parking lots, used car lots, real estate investments, so many lottery winners get taken by investing in businesses they know nothing about. If you want to follow your passion but don't know how to proceed, ask for lots of expert advice.

Sobering advice. Makes winning the lottery seem scary, and it is. I've read lots of stories about Jack Whittaker and how that big PowerBall literally destroyed his life.
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Old 06-20-2014, 11:01 AM
 
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IheartWva -- you and I may have done the same research. I read most of your advice on a website over a decade ago. So IF I ever win big (which might be EXTRA unlikely since I don't even play except for 5 times a year when pots get crazy big) -- I'm ready. There's also a book that was written about how to handle 'sudden wealth' of ANY kind, lottery insurance settlement, inheritance, etc.

Some additions to or comments on your advice:
(I'm presuming keeping the ticket in a secure place goes without saying)

1) Don't tell anyone
2) Don't change your routine, keep working etc.
(you haven't had 200 million dollars all this time, you can wait a couple of months. Yeah, I know you COULD die in the meantime.... AND IF that does happen it WILL be the first line in your obit -- Joe Blow: LUCKY enough to WIN the lottery, UNLUCKY enough to die before cashing it in)

3) Get your team of experts together FIRST, before you claim
4) know whether your state lets you claim anonymously, or without public name disclosure
5) Know possible options for staying anonymous, a trust, having a legal rep appear at the announcement, etc.

Some of what I've read said you REALLY want to be covert:

6) IF YOU CAN -- pay your bills one or two months ahead and change your phone number and contact info BEFORE you claim
7) IF YOU CAN -- pay off any debts, or things that could be claims against the winnings

(if you owe back child support or have lien or whatever -- tell your team so arrangements can be made to get that cleaned up. For example states check to see if you owe back child support or if you're wanted BEFORE they cut you a check. Also I've read that it can be a couple of weeks from the time you see someone presented with that big fake check on TV -- and they actually get any money. So if you're living paycheck-to-paycheck -- just know that. You'll GET the money. Just know that you don't walk in with a ticket and check a 10 million dolalr check the next day.)

8) BEFORE YOU CLAIM -- move to a hotel taking what you need so you can stay gone for a while -- so you don't have to go home from any public appearance, in case you're followed or recognized.
9) stay away from the house for at least TWO WEEKS. Have someone else check on it if you have to.
10) after two weeks drive back to the house and just drive BY your street -- see if you get any hints or some kind of activity that is 'different' -- then drive DOWN your street -- again looking for extra cars parked, or people -- anything that gives you the feeling the word got out, people know you're the big winner. If you get that vibe keep driving right on by. Let someone else go to the house to get any thing you need.

If you want hassle free ENJOYMENT OF THE WIN -- stay anonymous. If people find out, do what you can to have as much anonymity as possible.

There is NO WAY people claiming 280 million dollars the next day have had time to do what they really SHOULD DO, to protect themselves. But that's them not me, so oh, well.

-------------------

As for the gift tax and owing money on high amount gifts. I think that is true. There may be ways to get around it. But it is correct that the person GIVING the money, pays the gift tax -- which is hefty.)
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Old 06-20-2014, 11:30 AM
 
Location: Southlake. Don't judge me.
2,809 posts, read 3,564,894 times
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Quote:
Originally Posted by rdflk View Post
As for the gift tax and owing money on high amount gifts. I think that is true. There may be ways to get around it. But it is correct that the person GIVING the money, pays the gift tax -- which is hefty.)
OK, since it's been mentioned...

There is an annual exclusion amount of $14,000 per person, which means you can give $14,000 each to any person/people you want without it being a "taxable gift". If you're married, that effectively means $28,000 per year to any person/people, assuming your spouse is on board and/or you elect to "split gifts", and since this is a web post and not a tax article if you want to know more about gift-splitting google it or talk to a tax attorney.

I'll note that the $14,000 annual exclusion only applies to "present interest" gifts (such as "here's a check!", for example), and if you have to care more about the details of what constitutes a "present interest" gift and what doesn't, then again, not the sort of thing to learn about in an internet post. Suffice to say that certain gifts to certain trusts where one may be a beneficiary may not constitute "present interest" gifts, but then there's things called "Crummey Powers" and all sorts of jargon that, again, if you have to know it, you shouldn't be learning about it here.

If you give someone more than $14,000 all at once, the amount in excess of $14K is a "taxable gift", and it effectively depletes your lifetime exemption amount. Currently, everyone has a $5.34 million lifetime exemption. So, if you give Uncle Joe a check $1,014,000, the $14,000 is an annual exclusion gift, the $1 million above that is a taxable gift, but that effectively reduces your lifetime exemption from $5.34 million to $4.34 million. As long as your total lifetime taxable gifts have not exceeded your lifetime exemption, there will be NO GIFT TAX DUE on the gift currently.

When you die, you (well, your estate and your heirs. You'll be dead so you won't care) will have to deal with estate tax. That's essentially your taxable estate (absent any other planning, effectively your net worth) less your remaining lifetime exemption (the actual calculation is a tiny bit different, but this is basically what happens). The amount of your taxable estate in excess of the lifetime exemption gets taxed at a 40% federal rate (I'm assuming no state estate/inheritance taxes in this example. Most states don't have an estate tax, but some do. In general if there is a state estate tax it will be deductible from your taxable estate for federal purposes. Almost all states do NOT have a gift tax.)

So, say you're worth $10,340,000. You give uncle Joe a million bucks (let's ignore the annual exclusion for now for simplicity's sake). That's a taxable gift, but you have a 5.34 million lifetime exemption. So no gift tax is due now, you file a gift tax return showing the gift to Uncle Joe. A week later you drop dead, now worth $9,340,000 million. Your estate tax is your 9.34 million taxable estate less 4.34 million lifetime exemption, which equals 5 million, times 40%...your estate owes the feds $2 million.

Note that if you hadn't made a gift, you would have had a net worth of 10.34 million, less the 5.34 million lifetime exemption, for 5 mil net worth times 40% equals 2 mil taxes. Yes, that's why it's done that way.

The important thing to realize is that making a gift of more than 14K to any one person now usually does NOT trigger any gift tax. In fact, if you're worth 3 million and gift a million to your only child, not only is there zero gift tax, but when you die (assuming your net worth doesn't grow much) you'll have zero estate tax as well.

The above is a REALLY quick and simple explanation of some of the interplay between gift and estate taxes. Circular 230 Disclaimer (although I think the IRS just came out with new rules which means I don't have to say this, but what the heck): all of the above could be Totally Wrong. If you have a few million you want to give away, or even a few thousand, you should talk to an actual tax attorney or adviser rather than go by what someone posted on a web forum that could just be the ramblings of a high school dropout who lives in his parents' basement. If you use your reliance on this as a defense if you screw up with the IRS, they'll laugh at you.
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Old 06-20-2014, 06:50 PM
 
9,291 posts, read 11,138,237 times
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Quote:
Originally Posted by synchronicity View Post
Er, that's wildly incorrect. There's a small nugget of truth buried in there (the 14K annual exclusion), but beyond that it's a whole lotta wrong. Sorry.
I looked it up.....I was going off old info.....at one point the lifetime exclusion was like 600K and the tax liability was 50%.....I just didn't keep current.

Thanks for the update!
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Old 06-21-2014, 05:36 PM
 
Location: Southlake. Don't judge me.
2,809 posts, read 3,564,894 times
Reputation: 3590
Quote:
Originally Posted by City Guy997S View Post
I looked it up.....I was going off old info.....at one point the lifetime exclusion was like 600K and the tax liability was 50%.....I just didn't keep current.

Thanks for the update!
No probs, glad to help. And yeah, at one time the exclusion was 675K and the estate tax was 55%! Note that the current 5.34 million per person is also adjusted annually for inflation (It was 5 million in 2011) so not only can a married couple effectively have $10.68 million between them with zero estate tax at the death of the surviving spouse, but that amount will increase over time.

There's scads of ways to mitigate estate tax exposure for people worth more than that, and if someone ever won a Giant Lottery I'm sure they'd be hiring some high-powered estate planner peeps to deal with it. I'd still classify "Federal Estate Tax Exposure" into the "Such Problems One Should Have" category.
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Old 06-21-2014, 06:56 PM
 
Location: MMU->ABE->ATL->ASH
9,002 posts, read 16,118,243 times
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Start up the biggest contest City-Data has ever seen... $1 million dollar prize
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Old 08-25-2014, 01:49 AM
 
Location: Phoenix
852 posts, read 780,974 times
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20M is good enough to self generate money, hence, I would keep lifestyle as is.

I would quit my job immediately and buy a business franchise worth 5-10M. The rest, I will invest in mutual funds, real estate, etf's and stocks. Those were automatic generate money good enough for me to live my everyday life on a monthly basis.

I would also try to venture in my own concept business since I already have the capital. I will spend 5-8 hours per day conceptualizing and organizing my future business.
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Old 08-25-2014, 02:23 AM
 
Location: Between Heaven And Hell.
11,076 posts, read 7,179,692 times
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Buy land, plant trees, live off the grants I would get for doing so.

Maybe buy more land, plant more trees.
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