I've heard a lot about forming a trust to accept winnings but I don't understand what the benefits are. Do you pay less in taxes? Why do so many people recommend them? I know some people say you should wait to collect your winnings while you assemble a team to help you deal with the $, but if I've got a piece of paper worth millions of dollars the last thing I want to do is hold onto it. Thanks.
Your FIRST priority is to protect your windfall from LIABILITY. By establishing a trust you establish a separate entity in which to title the funds. There are practical reasons for this. Let's say one day you get into your car and with every intention to exercise due care you look first in all directions and seeing nothing you very slowly start to back out of your parking space. What you did not see was that little kid on his trike now squashed under your wheels....dead. No doubt his family will now sue you into oblivion. If you claim your winnings in your own name (bad idea) you now expose those funds to the consequences of your actions. However, if those funds are held in trust (good idea); it WILL be successfully argued that the trust was NOT behind the wheel when you were. The distinction is established on IRS Form SS4. Every trust is formed not just with a name but with what really counts is the FEIN issued by the IRS upon application. This number is the equivalent to your Social Security Number. It cements the IDENTITY to the ENTITY of the trust vehicle SEPARATE from you and ALL your future errors, acts and omissions.
Another example comes to mind. Let's say you are a bitter, jealous creep who can't stand the possibility that your ex-wife is getting on with her life. So, one night you go over to her house to pick ANOTHER fight with her only this time you get totally out of control. You start to stab her about a 1000x when, quite by accident a stranger happens to walk by and in your furry you stab him too. You are then tried for the double murder and for a variety of reasons I won't get into here; you are aquitted. Next, the families of both victims sue you in civil court. This time you are found to be FINANCIALLY LIABLE for the 2 deaths to the tune of $60m+ (sound familiar ?)
So how is it possible for OJ Simpson to lounge away his days on the golf course with this judgment going unpaid ? Because, before he slaughtered 2 people, he had the foresight to transfer many of his assets into separate trusts in anticipation of an uncertain future. But hey, s--t happens.
Preparation, it's not just for BoyScouts anymore !!!
Annuities are for Lovers...Lumps are for LOSERS !!!
Worldsux what he is saying is correct, but look at his signature (Annuities are for Lovers...Lumps are for LOSERS !!!). I would think he would follow his own advice!You can not protect an annuity from LIABILITIES/JUDGMENTS! But you can protect A TRUST!
Hey GuessWhat, why give such good advice when your own signature on LP says something totally different about you all together? It sounds like to me you have a split personality (one with common sense and another that is as dumb as taking an Annuity). Which is it?
Thanks so much for the comprehensive answer GuessWhat. At least now I know why forming a trust is so important. Let's hope one day I'll have to put that info to work for me, lol.
Some one in Powerball formed a trust and claimed the jackpot in the name of the trust. They listed the names of everyone in the trust. Using a trust, or LLC, to hide your name is obviously a waste of time.
I completely agree with GuessWhat. It can only be for liability reasons. If Mister Jack had done that, he could pat all the woman on the butt he wants. They could sue him and only get a shot at only what the trust paid him. Hummmmm ... there is an idea there!!