Forty-three states operate or participate in lotteries -- including the multi-state lotteries of Mega Millions and Powerball -- as of the date of publication of this article. Only Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah and Wyoming take part in neither Mega Millions nor Powerball. Lotteries are controlled by state laws, so it may be necessary to refer to your own state’s lottery regulations when it comes to handling annuity payments.
Lottery Payout Options
The winner of a Mega Millions or Powerball jackpot can choose to receive the prize money as a series of annuity payments or as a single lump-sum payment. When the annuity option is selected, the first payment is usually made within a couple weeks of claiming the prize and followed by 29 more annual payments. When the lump-sum option is selected, the payout equals the present value of the future payments minus applicable taxes.
When a Winner Dies
If the winner of a Mega Millions jackpot dies before the entire prize winnings have been paid out, the remaining winnings will be paid to the deceased winner’s designated beneficiary or the winner's estate. The lottery will continue to make payments to the beneficiary or estate according to the established payment schedule, according to the Mega Millions website's frequently asked questions page.
The rules for distribution of the remaining balance of a Powerball jackpot are not as restrictive. "The estate will handle the lottery prize," the Powerball website's FAQ page explains. "A lottery annuity prize is just like any other asset. You can pass any remaining annuity payments on to your heirs or to anyone else." The estate, the FAQ page notes, may choose annuity payments or a lump sum.
From the Living to the Living
Annuity payments cannot be transferred from a living winner to anyone else, but a lottery jackpot can be redeemed by a group of people when the winning ticket is presented. Each winner may even be able to elect different payment options. Each state with a lottery establishes its own requirements for how many people may share one prize and how the prize can be distributed.
Annual Gift Limits
As of the date of publication, anyone may give away up to $14,000 per year per recipient without paying gift taxes. For married couples, the maximum gift is $28,000 per recipient per year. There is no limit to the number of individuals to whom you may make such gifts in a calendar year.
References
Writer Bio
Dawn Aldridge has worked in accounting and business since 2004. Her diverse experience includes public, small business and government accounting, as well as logistics and inventory management. She holds an MBA from the University of Illinois at Springfield.