A young man from the Boston area recently came into a substantially large amount of cash when he won the lottery.
With that much cash on hand, we must ask -- what is his estate planning strategy?
Sandeep "Sunny" Singh of Hyannis won $30.5 million in the Mega Millions lottery this week. The 22 year old has talked about what he plans to do with the money. He chose to receive it outright in one lump sum of $23 million, reports The Boston Globe.
Of course, after taxes, his lump sum would be reduced to $16.1 million, writes The Globe.
Singh has indicated that he plans to pay off his mother's mortgage, give money to his sister, and donate money to charity.
First off, we beg to ask the burning question on many people's minds: Is there any way he can avoid tax on the lottery winnings?
The answer to that is unfortunately not very positive. He doesn't have many options, if any, to avoid income tax on the lottery winnings, if he chooses to take the winnings up front.
Moving on, can his family members avoid income tax on the winnings that he gives them?
Let's first look at the "gift" he'll be making. The current annual gift tax exemption amount is at $13,000. This means that Singh can gift away up to $13,000 per year to each recipient, without having to pay gift tax.
But from the looks of it, he plans to gift a lot more.
If these gifts are for medical expenses or tuition, however, he won't have to pay gift tax on the amounts over $13,000.
Gift tax aside, another issue is that the recipients of his gifts could be taxed on the amount they receive, as income.
He can get around this by placing the funds in an irrevocable trust for the benefit of the family members, giving them a set amount of regular income from the trust.
In fact, he could also make annual "gifts" to the family member's trust, in an amount that falls within the annual gift tax exemption. This way, he avoids paying gift tax on the amount.
Hopefully, he will look for a good estate planning or tax planning attorney to help him out.
His family members have a huge windfall to look forward too. But he has indicated that one person isn't entitled to his good fortune-- his ex-girlfriend, who dumped him weeks ago.
- Search Directory of New York Estate Planning Lawyers (FindLaw)
- What Should Karen 'the Bus Monitor' Klein Do With Her New Wealth? (FindLaw's New York Estate Planning News Blog)
- Structured Settlements (FindLaw)