Have a super 'lotto' trust in your lawyer?

Legal Notes

With Gavin Goffe

Wednesday, October 05, 2011

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If there is any truth in the phrase, "More money, more problems" then the winner of the $262.2 million Super Lotto jackpot is in deep problems. This lucky winner has now become a 'person of interest' so it's little surprise that he or she hasn't yet been publicly named. The good news for lottery winners is that there's a perfectly legal way to keep your identity secret and minimise the taxes that you pay on your winnings.


A lottery ticket is a type of bearer instrument, similar to a cheque made out to "cash". Regardless of who purchased the ticket, anyone who has signed the back of the ticket can claim the jackpot. A person holding an unsigned lottery ticket has the option, therefore, of hiring a lottery trustee to collect the winnings on his or her behalf. For a variety of reasons, winners of large jackpots may prefer to have their attorneys collect the winnings for them. We discuss these reasons later.


Using a carefully drafted Trust Deed is critical to the entire process of preserving a winner's anonymity. The Trust Deed must be able to satisfy very technical legal requirements in order to establish that the original ticket holder is the true owner of the prize money. Once the Trust Deed is signed, sealed and delivered, the lottery trustee will sign the back of the lottery ticket, thereby entitling him or her to claim the winnings in his or her name. The trustee would then present the ticket for payment and participate in the mandatory photo shoot (wig and sunglasses optional) before making the payout to the beneficiary in accordance with the terms of the Trust Deed. All along, the identities of the beneficiaries of the trust remain secret.


Why not just don a wig and sunglasses and collect it yourself? Alternatively, why not trust a friend or family member to collect? Consider the following:




(i) The lottery company reserves the right to publish the winner's name and the parish in which the ticket was purchased. It won't take long for relatives, friends, creditors, baby-mothers and baby-fathers to figure it out.


(ii) If you place your confidence and your money with a friend, you will probably lose all three. Most good friends are only better than pocket money, not super lotto money.


(iii) If you send a family member to collect, you might end up as a target for kidnappers. The truth is that your money alone will set you free.


(iv) To combat money laundering, financial institutions will require proof of the source of funds when unusually large deposits are made. They are unlikely to be satisfied with a note from your friend, unless your friend is a banker or lawyer or similarly qualified to vouch that the money is not the proceeds of crime.


(v) The lottery scam is always in need of trusting souls.




Sceptics will argue that lottery trusts are more expensive than they're worth, but nothing could be further from the truth. Although privacy is priceless, for many persons it has a quantifiable value. One such benefit is the ability to negotiate a settlement of outstanding liabilities before your name is published along with a photo of you holding a lottery cheque. The 90-day window to collect lottery winnings is often not enough time to resolve key liabilities. Take, for example, the tens of thousands of self-employed Jamaicans who have never filed an income tax return. Recovering the full amount of interest and penalties on 6 years' worth of unpaid income tax is considered a jackpot for the Tax Man. Speaking of taxes, there is a multi-million dollar issue of the legality of the government's 15 per cent cess on lottery winnings. Usually, winners are so happy to have won that they don't think to enquire about what they've lost.


The benefit of using an attorney to draft the Trust Deed is obvious. Whether to use an attorney to collect the winnings depends on a number of factors. If your lawyer is a member of a firm of attorneys, each of the partners would be personally liable if any one of them breached the terms of the Trust and stole a client's money. The ability to hold several lawyers accountable for the actions of one is something that lottery winners would find attractive. Further, the attorney-client privilege extends to the identity of a client, so an attorney can only disclose the name of his or her client if he or she has the client's permission. A breach of that duty of confidentiality carries serious sanctions for an attorney.


There are many stories of lottery winners who end up regretting that they ever hit the jackpot. Winning the lottery can be a tough job, but somebody's got to do it.




Gavin Goffe is a Partner at Myers, Fletcher & Gordon and is a member of the firm's Litigation Department and Tax Practice Group. Gavin may be contacted via gavin.goffe@mfg.com.jm. This article is for general information purposes only and does not constitute legal advice.







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