A lottery winner was only allowed to cash in a portion of her ‘unbelievable’ Jackpot win due to a little-known loophole, paying over £50,000 in taxes to receive the sum.
Ashley Smith, from Mason County, Kentucky, bought the lucky lottery ticket last week after putting her children to bed.
“I was just waiting for the kids to go to sleep and decided to play,” the mum-of-two explained.
To her amazement, the Bank Buster online jackpot appeared on her screen, prompting Ashley to leap out of her bed in disbelief.
“I thought she was pretending. I called my mum, and she couldn’t believe it either,” Ashley’s husband said in a press statement.
The following morning, the entire family drove to the Kentucky Lottery headquarters to redeem their £176,000 prize, but only took home £126,200 due to an obscure loophole.
When it comes to collecting lottery winnings, individuals generally have two choices: opting for a lump-sum payment or selecting annuity payments disbursed over 29 years.
Opting for the lump-sum payment route, the family had to pay £50,000 in taxes.
Many financial advisors advocate for the lump-sum option, which allows winners to take control of the money immediately.
Experts recommend assembling a team of professionals, including financial planners, lawyers, and accountants, to guide winners through the complexities of newfound wealth.
Legal specialist Andrew Stoltmann emphasised the often neglected downsides of the situation, pointing out that a significant percentage of lottery winners eventually declare bankruptcy.
“They then take this massive sum of money and they just don’t really know what to do with that,” he told the US Sun.
But, he continued, those who take the annual payments are protected from losing the entirety of their winnings in one go.
While the annuity route can offer benefits like safeguarding winners against impulsive spending and financial instability, however, it does require yearly claims during tax filings.
