Playing the lottery is a game of chance, but someone has to win. Oftentimes, especially when jackpots swell to gargantuan amounts, several friends, family members or co-workers pool their money and purchase tickets as a group. After the celebration ends, the real work of figuring out how to split the prize begins.
Each state runs its own lottery, and the rules vary according to that state. This is true even for multiple-state games such as Powerball and MegaMillions. You must claim the winnings within the state where the ticket was purchased. The majority of state lottery websites contain a list of Frequently Asked Questions or FAQ's with information on multiple winners. For example, North Carolina and New York allow multiple winners to claim the prize, while the state of Washington will only accept one claimant.
In states that allow just one winner, a group can form a legal entity to handle the claims process. This may be a corporation, a limited liability company, a partnership or a trust. An attorney can help the group determine the best approach based on the rules of that state's lottery.
If you are part of a group that buys lottery tickets together on a regular basis, you may want to form a legal entity at the onset. This can protect all members of the group should there ever be a win. Drawing up a contract with specific guidelines about playing and dividing winnings can prevent complications like those encountered by some co-workers in New Jersey. Though they pooled money and bought tickets as a group for years, one member claimed his winning ticket was purchased separately. Without a written contract, the case became one player's word against the others.
Lottery winnings are a welcome windfall, but they come with sizable tax obligations. There is a danger in one person claiming the prize on behalf of a group because that group member incurs the entire tax liability. When the monies are distributed to fellow winners, the department of revenue can deem these taxable gifts resulting in additional tax burdens to each winner. Consult a tax attorney, accountant or financial adviser prior to accepting any winnings to get advice on the best way to minimize tax payouts.
Getting the Money
If you believe your group has the winning numbers, call the state lottery office for specific instructions, including scheduling a time to appear in person. Some states require any and all winners to attend a public awards ceremony. Only six states allow lottery winners to remain anonymous -- Kansas, Delaware, Michigan, North Dakota and Ohio. In others, an Affidavit of Multiple Ownership must be completed if all of the winners can't collect in person.
- New York Lottery Live: Frequently Asked Questions
- American Bar Association: Advising a Client Who Has Won the Lottery
- North Carolina Education Lottery: Information
- Washington's Lottery: Frequently Asked Questions about Claiming a Washington's Lottery Prize
- The New York Times: So You Won $38.5 Million? Not So Fast, Co-Workers Say
- USA Today: Few major lottery jackpot winners get chance to be anonymous
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