Lottery Pool Contract Questions to Ask Before You Start
Questions that your lottery pool agreement should cover
Lottery pools are an effective way to boost your odds of winning the lottery without spending any additional money. They can also raise morale in the workplace, bring neighbors closer together, and give members of an organization something to talk about. But there is also the potential for a lottery pool to cause hard feelings. To avoid this, you need a lottery pool contract.
A lottery pool contract simply outlines the way that the pool will be run, so that everyone is on the same page and knows what to expect.
A lottery pool contract doesn’t have to be extremely formal. The idea is to make sure that everyone knows, understands, and agrees to a set of rules. This can help you avoid lottery pool problems ranging from hurt feelings to lawsuits.
Before you start writing any legal document, you want to gather the information you are going to need. Here are some of the questions that you might want to answer in your contract.
Who Will Be Your Lottery Pool Manager?
It’s always a good idea to have one person who is in charge of the lottery pool. This person doesn’t have to do all of the work; they can delegate, too. But they are the point of contact if anyone has questions or concerns. They also make sure that every participant has a copy of the lottery pool contract, they keep track of the signed copies, and they make decisions like where to store the tickets after they have been purchased or who should be the one to buy the tickets this week.
When Will Your Lottery Pool Buy Tickets?
Some lottery pools buy tickets on a regular schedule like once per week, or once per month. Others buy tickets every time a jackpot hits a certain value. And other pools are valid only for a single drawing, then form anew every time an interesting lottery drawing (like a big jackpot prize) comes up.
Your lottery pool agreement should specify which drawing or drawings will be covered. It should include both the lottery games your pool will play and the specific drawings you will participate in.
Who Will Participate in the Lottery Pool?
Before you start to write your contract, you need to know who the pool members will be. Should your group hit a jackpot, some people are going to regret not participating, and regret make those people litigious.
Coworkers have sued winners because they claimed that they were unfairly excluded from participating in a pool that resulted in a jackpot. So you should be sure to outline who will be invited to play and how people can find out about the lottery pool.
Other questions your lottery pool agreement should cover include whether (and when) new people can join the pool and whether members can participate in some drawings while passing on others.
Can Members Buy More than One “Share” In the Drawing?
Some lottery pools allow members to put in more money to receive more shares in the prize if they win. For example, if a single ticket costs $2, a member can choose to throw $10 into the pot to receive 5 shares of the jackpot they win. The pool would then buy five extra tickets, raising everyone’s odds of winning.
Other lottery pools keep it simple by creating an even split; every member puts in the same amount of money, and every person receives the same amount in the case of a win.
Your lottery pool contract should outline how the jackpot will be split.
How Will the Lottery Numbers Be Chosen?
When you buy lottery tickets, you have two options: let the computer choose your numbers randomly, or pick your own numbers. Which method will your lottery pool choose?
The simplest option is to agree to let the numbers be chosen randomly, but if you do agree to let members choose their own numbers, you need to specify how and by whom the numbers will be chosen.
If you go that route, you might also want to have your lottery pool contract waive responsibility if the person buying the tickets accidentally chooses the wrong numbers. Imagine the bad feelings if the wrong numbers were purchased and the right ones won!
What Happens with Small Prizes Your Lottery Pool Wins?
Everyone joins a lottery pool in the hopes of winning a jackpot, but you are much more likely to win a smaller prize. Your lottery pool contract should clearly state what happens to low dollar-value prizes.
You can try to divvy up the prize among all the participants, no matter how small. Or you can put the money toward buying tickets for another drawing. Or you can choose to give small amounts to charity, or to an office coffee fund, or save them up for a group luncheon.
If you do choose to put the smaller prizes toward the next lottery drawing, it makes sense to say that only people who chip in to participate in the next drawing get the benefit.
For example: Say that this week, your pool of 20 people wins $5. That $5 is put toward the next week’s drawing. In the next week’s drawing, only 15 people participate, each putting in a two dollars to buy a ticket. With this suggestion, only the 15 participating people have the chance to win in the new drawing. Although 20 tickets are actually purchased, the 15 will split any jackpot 15 ways.
Your lottery pool agreement should state not only what to do with small prizes, but what the cut-off is for a small prize. Is it $5? $20? $100? $1,000?
Can Lottery Pool Members Buy Tickets Privately?
Imagine that you’re in a lottery pool and you find out that the pool manager has hit a jackpot, but isn’t sharing the funds. Why? Because the manager says that they bought the winning lottery ticket privately, not with the lottery pool’s funds.
This scenario has happened in the past, resulting in bitterness. To avoid it, make sure your lottery pool contract states whether participants, especially the person in charge of buying tickets for the group, can purchase lottery tickets outside of the pool as well.
If your contract does allow members to buy lottery tickets privately, be sure to make copies of the group’s tickets and distribute them, to be very clear which tickets belong to the pool. It’s a good idea to do this in any case.
Will Your Group Take a Lump Sum or Annuity?
If your lottery pool does win a big jackpot, you’ll have to decide whether to take a lump sum immediately or take an annuity and spread the winnings out over a number of years.
It’s a good idea to make the decision ahead of time and spell it out in your lottery pool contract to avoid conflict over the answer if you actually win.
Will Your Lottery Pool Remain Anonymous If You Win?
Some states allow their lottery winners to remain anonymous in case of a win. This helps the winners to avoid some of the negative fallout of winning the lottery, such as losing jealous friends, having reporters knocking at your door for an interview, or being deluged with requests for handouts.
With a group prize, keeping your identity anonymous becomes difficult if some members aren’t on board. To help avoid problems down the road, have everyone agree at the outset whether they’ll stay anonymous or announce their win, assuming you’re in a state which allows you to make the decision.
Finishing Up Your Lottery Pool Contract
This is not intended to be a comprehensive list of all of the issues that need to be covered in a lottery pool contract, but rather a way to start a conversation about your goals with your group. For legal advice, you should always consult a professional lawyer with familiarity with this kind of contract.
Once you have a legal document drafted, it’s important to have everyone read it, make sure everyone understands it (don’t let anyone just skim through it!), and then have each member sign it. You can add weight to the contract by having an uninvolved third party witness the signatures (even more if the third party is a notary!) Your lottery pool manager should keep all of the copies.
There may be local and state laws that influence your lottery pool agreement. Your state, your company, or your region may prohibit lottery pools. Be sure to speak with your company’s legal or HR department if you aren’t sure if you are allowed to start a pool.
A lottery pool contract is a set of rules that participants agree to before buying tickets. See questions your pool should answer in their contract.
20 Year Old Oral Agreement To Split Lottery Winnings Is Upheld
Winning the lottery would be great. And if you can’t win it yourself, having someone close to you win may be second best–even if the person forgets they were close to you. That could be the advice from Howard Browning of Florida, who says the $1 million jackpot his ex-girlfriend Lynn Poirier won–eight years ago–is half his. There’s a lot of history here.
Mr. Browning claims she won the $1 million and walked out, reneging on the deal they had to split it. And his suit against his ex for half the $1 million prize got a win in court. The Florida Supreme Court has sent the case back to trial, ruling that a verbal agreement can be valid as long as the couple were still involved when they said the words. Mr. Browning claims their oral agreement was way back in 1993, after two years of living together. The trial court will have to decide if they were still a couple and actually had a deal, but his win is still big.
Everyone knows that the taxes on winning tickets are a downside. In addition to paying the taxman, what if you have friends, family or co-workers claiming a share of the loot? It can get ugly, and it happens more often than you might think. You must add the inevitable lawyers’ fees for defending against the claims. Most such cases settle, and the tax hit on such an unfortunate event can be surprising.
Take the 53-year-old California woman who won $1 million, but is now defending a lawsuit by the liquor store owner who sold her the winning ticket. Eva Reyes is the winner, but the owner of the liquor Store where she bought the ticked has sued. Laxmi Bhardwaj owns USA Liquors in Milpitas, California, where Ms. Reyes bought the ticket. The store owner claims Ms. Reyes promised to split the money—$350,000 each after taxes—for fronting the money to buy the tickets.
The plaintiff claims there is a signed note guaranteeing him half the winnings. But Ms. Reyes claims the deal was for $50,000, not half. The terms of the note are sketchy, with just the dollar amount and a signature, according to Ms. Reyes.
Ms. Reyes’ attorney, Nelson McElmurry, suggests that the note may have been altered after his client signed it. Such are the down and dirty disputes that can plague lottery winners. Ms. Reyes acknowledges that she originally meant to give $50,000 to the store owner, Mr. Bhardwaj. But with a lawsuit and the claim for half, all bets are off. Ms. Reyes’ attorney says his client has the legal right to change her mind, despite the writing. As the case progresses, the disputed $350,000 is in an escrow account.
The stakes and tax problems are larger on bigger lottery prizes. An added problem is taxes. Unless there is a tax partnership, a winner may be taxed on it all, yet only be allowed a partial write-off for the damages paid to those claiming a share. The technical reasons are limitations on tax deductions and the dreaded AMT, which stands for alternative minimum tax. Even if you win a lawsuit, you may have to pay the IRS, even on your attorney’s fees paid directly to your lawyer. When people talk of paying tax on money they never see—like money paid to a contingent fee lawyer from a case—it is usually because of the AMT.
Not every lottery case involves co-workers or friends. Sometimes the disputes are with family members, which can be even worse. In Dickerson v. Commissioner, an Alabama Waffle House waitress won a $10 million lottery jackpot on a ticket given to her by a customer. The trouble started when she tried to benefit her family and spread the wealth. The Tax Court held she was liable for gift tax when she transferred the winning ticket to a family company of which she owned 49%.
Tax advice before the plan would have avoided the extra tax dollars, that were generated because the tax plan was half-baked. She shouldn’t have assigned her claim in a waffle house. Time and again, winners have trouble paying their taxes and resolving disputes. But cheer up, your chances of winning are, well, tiny.
Be careful what you say about splitting your lottery winnings. That’s one lesson from lottery winners who end up in litigation.