How to Create a Trust to Claim Lottery Winnings

By Cindy DeRuyter, J.D.

How to Create a Trust to Claim Lottery Winnings

By Cindy DeRuyter, J.D.

Many people dream of winning the lottery. If you win a substantial jackpot, taking the time to consider how you might protect and manage your wealth is a smart move. Some lottery winners choose revocable trusts to safeguard their winnings. If you choose this route, you can create a trust relatively quickly.

Cheering woman looking at her phone

But, before you create your trust, you first need to determine whether your state allows for anonymity in claiming lottery winnings. Because individual state laws vary, you shouldn't assume a trust will protect your identity. Investigate your state's laws before deciding on a course of action.

After determining what your state allows, follow these steps to create a trust to claim your lottery winnings.

1. Consider options for trust control, beneficiaries, and other provisions.

When you create a trust, you establish provisions for managing and distributing the assets placed in it. Name a trustee, or someone who oversees the management and distribution of the assets, who will adhere to the terms of the trust agreement. If you create a revocable trust, you can be the trustee. However, you should name one or more people or institutions as successor trustees to serve during periods of your lifetime incapacity and after your death.

With a revocable trust, you can also name one or more people or charitable organizations to receive trust assets during your lifetime or when you pass away, called beneficiaries. When naming minors or financially irresponsible beneficiaries or when leaving significant sums of money to an individual beneficiary, consider how to best structure distributions to protect the beneficiaries' interests. Financial and tax professionals can help you evaluate your options.

2. Draft and execute your trust agreement.

Just as state laws govern lottery winners' anonymity, state laws also govern trusts. Your new trust agreement must meet state-specific requirements.

Generally, most states require you to clearly identify your trustees and beneficiaries and define the terms for trust management and distribution. Still, you should understand what your state's laws say about how to execute a trust agreement. In some states, the grantor, or creator, must sign the agreement before a notary public. Other states impose requirements for having witnesses sign as well.

3. Claim your lottery winnings as trustee of your new trust.

After creating your valid trust agreement, you are ready to open a bank account or investment account in the name of the trust to hold the proceeds from your winning lottery ticket.

If you create your new trust before claiming your lottery winnings and if your state's laws say trusts can claim prizes, you can claim the winnings as a trustee rather than as an individual winner. Even if you claim lottery winnings in your own name, you can put the assets into your new trust. Doing so may have several advantages, including avoiding probate court when you pass away and potential protection from creditors, depending on state law and the trust's provisions.

Whether you won a major lottery jackpot or simply want to protect other assets through proactive estate planning, consider using a trust. You may want to work with an online service provider to ensure your trust complies with your state's laws. Or, you might consider hiring an estate planning attorney in your state for assistance.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.