A lot of Americans enjoy playing the Powerball lottery. You are given the opportunity to become an instant multimillionaire, and sometimes the jackpot accumulates to stunning proportions.
A record-setting jackpot was recently available, and the winning ticket was sold in the Sunshine State of Florida.
What would you do if you won a Powerball jackpot and took a lump sum payout of say $400 million? Unfortunately, you would immediately have to part with a significant percentage to pay income taxes.
Once this has been done you may think that your tax responsibility is behind you. The next order of business will be to make your family members rich as well.
Before you do this you may want to take pause and discuss everything with a licensed estate planning lawyer.
There is a unified gift/estate tax in place on the federal level. The top rate of the tax is 40%, and the current lifetime exclusion is $5.25 million.
In addition to this lifetime exclusion, there is a $14,000 per person annual gift tax exclusion. Let’s say that you use that exclusion to give your son $14,000. Now you want to give him $20 million.
Your lifetime exclusion is only $5.25 million. So, $14.75 million of this gift is going to be subject to the gift tax and its 40% rate.
And of course your own assets would be subject to the estate tax if you were to pass away without doing anything to mitigate your exposure.
There’s a lot to think about if you were to come into a large sum of money, and the best way to wrap your head around it would be to engage the services of an estate planning lawyer who has a thorough understanding of wealth preservation strategies.
- Preparing for Coronavirus - March 31, 2020
- Beneficiary Designations and Other Non-Probate Transfers - February 24, 2020
- Estate Planning Conference DiscussesSECURE Act and More - February 17, 2020