Can Powerball and Mega Millions winnings be inherited?
Some winners are not able to fully enjoy their lottery winnings in their lifetime. Some wonder if they can pass their winnings on to their next of kin.
Some lottery winners accept their prize as an annuity, meaning that the jackpot is distributed over thirty years, with the winner receiving one payment each year. But what happens if someone passes away before all their payments are made? In these cases, can the winnings be inherited by the winner’s next of kin?
According to RMO Probate Litigation, a beneficiary can often inherit the remaining payments of an annuity scheme. However, winners should “check with the laws in [their] state to determine the applicable rules.”
You might be interested in: Powerball jackpot: is it better to take the cash option or annuity payout?
What about lump sum payments?
In cases where the lump sum option was taken by the winner, the inheritance is much more straightforward. These winnings are treated as the assets of the deceased person and will be distributed based on the will of the deceased person or by the state according to the laws that govern the distribution in cases where no will was left. To protect any heirs, detailing who the annuity should be transferred in the case of one’s death should be written in a person’s will. However, in cases where no will is left, according to the Financial Strategist, the annuity becomes an asset within the probate process.
Will taxes need to be paid on winnings that are inherited?
In both cases, those who inherit lottery winners will only need to pay taxes on the winnings if they are valued at more than $12,920,000 in 2023. These taxes can be avoided by putting the winnings in a trust. The laws governing the estate taxes are highly controversial. In the United States, much larger estates can be passed to between generations, compared to allies and comparable OECD countries. For example, in the United Kingdom, estates over £325,000 are taxed up to forty percent.