How to use a trust to retain anonymity as a Lottery winner
If you are fortunate enough to win the lottery, you may have difficulty concealing your newfound wealth unless you purchased your ticket in one of six states that permits you to remain anonymous. They are Delaware, Kansas, Maryland, North Dakota, Ohio and South Carolina.
However, there are ways in which you can retain your anonymity. You can use some strategies and create legal entities that will help you maintain your privacy.
One strategy is the use of a Blind Trust. This type of trust is a legal asset management structure that can assist lottery winners in having control over their money, and retaining some semblance of privacy. The definition of a Blind Trust is a trust that tries to conceal the true owner from the public and asset searches. You can establish an entity, a trust or an LLC, and give it a name other than your own.
Another strategy, if you would like even more anonymity, is the use of a trust within a trust. This type of trust protects lottery winners from requests for funds, as well as from other people. Two kinds of trusts are required to create a trust within a trust.
The first is a Claiming Trust, which is the entity that claims ownership of the winnings. As the winner, you attach the ticket to the trust. Since the trust now has possession of the winning ticket, it can claim the prize. It then distributes the winnings to the Bridge Trust. In order to retain your privacy, the Claiming Trust should have an uncommon name that cannot be traced to you. However, the trust will still be directly connected to you.
As is the case with the majority of trusts, the Claiming Trust consists of three kinds of people. They are the grantor, who is the person who created the trust and whose assets are placed in the trust; the trustee, who is also the creator, and the individual who has management responsibilities over the trust; and the beneficiary, who is also the creator, and the person for whom the trust was established.
Although you have the option to establish an irrevocable trust, and designate a family member or attorney as trustee, and thus retain more privacy, you will have less control. Furthermore, while the majority of revocable trusts use the Social Security number of the grantor, it would be in your best interest to refrain from doing this. The reason is that state lottery commissions are state agencies, and thus, their records are controlled by the Freedom of Information Act, which enables a reporter or any other person to ask for the documents, and link the Social Security number back to you. Based on the rules of the state lottery commission, you may be able to form a limited liability company (LLC), which can serve as the grantor.
Under this strategy, the LLC would own the winning lottery ticket, and would serve as the grantor of the Claiming Trust. If a reporter finds the Claiming Trust, your name would not appear; only the name of the LLC would be associated with the trust. However, there are reporting requirements in some states that would identify the owner of the LLC. For instance, in California, within 90 days of creating an LLC, the owner must file a Statement of Information for domestic and foreign corporations. This requires the full name and address of the LLC’s managers and officers.
The lottery winnings are then deposited into the Claiming Trust, and then moved into the Bridge Trust. While the Claiming Trust helps to protect the winner’s identity, the Bridge Trust lists the name of the winner as grantor and trustee. This is acceptable because the Bridge Trust is not subject to requests associated with the Freedom of Information Act. However, since the name of the trust will be listed as beneficiary of the Claiming Trust, it is best not to provide the Bridge Trust with any information that can identify you.