Private Wealth – I’ve won big, but what happens next?
We all fantasise about it, some of us are lucky enough to have won a few pounds here and there, but what actually happens if you win the jackpot on the lottery.
Like most of us, I have already planned how my lottery winnings would be spent – new house, horses, holidays, treating the family and helping some charities that are close to my heart. I would certainly have great fun spending it. However, I realised that I have not planned for the practicalities of receiving such a huge sum of money. I also had no idea on some points associated with a win of that size and, if I am on that list of future winners, I really would need to find out.
I have given you the answers below to four questions I think most perhaps don’t know but would certainly need to know should they hit the jackpot!
Do I pay tax on a lottery win?
The good news is no, a lottery win is not regarded as income and so there is no tax to pay – your win is essentially tax free, fantastic! However, do bear in mind that the funds will form part of your estate when you die and at that time your estate could face some large Inheritance Tax consequences, the current rate being 40%!
Do I pay tax if I give away lottery winnings during my lifetime?
This really depends who your gift is to. Gifts to a spouse or civil partner are exempt for Inheritance Tax purposes, as are gifts to charity. Giving money away to children, friends or other family members does not mean that this stops the IHT charge. If you were to die within 7 years of making that gift, then IHT could be payable. If you do not survive the 7 years, the tax element of the gift is discounted but it is also important to remember the Tax is payable by the recipient – which of course they may not have been aware of upon receipt of the gift and therefore may come as a shock.
What happens to my winnings if I die?
The remaining funds form part of your estate and pass via the terms of your Will, if you have made one, or in the very unlikely scenario that you have not made a Will, via the Rules of Intestacy – which set out where you estate goes if you die without leaving a Will.
An astonishing 60% of people die without making a Will. This must be a priority for anyone with assets, let this be first on the list of things to do before booking that trip around the world.
What happens if I win the £10k per month prize and I die?
If a winner dies after the lump sum payments have started, the winner’s estate will receive a lump sum equal to the full amount of the total prize from Camelot.
In summary, if you are ever lucky enough to become a lottery millionaire, it is important to consider the above and get professional advice in relation to your Wills and Inheritance Tax planning options.
Remember; it could be you, good luck!
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to your own particular matter before action is taken.
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We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2022 by Legal 500 and Alistair McArthur is ranked in Chambers 2021.