Here you create an entity, a trust or LLC, and name it something other than your name. For example, one of my actor clients titled his trust using an obscure quote from a former president of the United States. Unlike a politician’s blind trust, he has 100% control of the trust, assets, and decisions. This doesn’t completely cloak the account, but it can make tying the trust to my client more difficult in an asset search. For example, Louise White, the winner of a $210 million lottery, named her trust the “Rainbow Sherbert Trust” after the ice cream flavor that led her to the grocery store where she purchased the winning ticket.
Remaining Anonymous After Winning the Lottery: Using a Trust Within a Trust
For high profile lottery winners who want even greater anonymity, a trust within a trust structure is recommended. This is an advanced strategy that should only be taken with competent and experienced legal counsel.
One of my sudden wealth colleagues, Jason Kurland, is a “lottery lawyer” and partner at Certilman, Balin, Adler, & Hyman, LLP. Jason has represented several of the largest Powerball jackpot winners and specializes in protecting the anonymity of lottery winners. Jason is an advocate of the trust within a trust structure because it not only shields winners from requests for money, but also protects them from others.
The trust within a trust requires two trusts:
First Use a Claiming Trust
It’s called the Claiming Trust because this is the entity that claims the prize. As the winner, you assign the ticket to the trust. The trust, which now holds the winning ticket, can claim the prize. The Claiming Trust is a short-term trust that simply claims the prize and then distributes the win to the Bridge Trust. To keep your win as private as possible, the Claiming Trust should have a unique title not at all related or traceable to you. For example, you wouldn’t want the trust to have your name, address, or other identifiable information as the title.
Handing over ownership of a million dollar winning ticket to a trust that is not in your name can seem reckless and scary. Why is this strategy recommended? Rest assured, even though the name of the Claiming Trust won’t have your name, the trust will be directly tied to you. The Claiming Trust, like most trusts, include three types of people: (1) grantor – this is you, the creator of the trust and the individual whose assets are put into the trust, (2) trustee – this is also you, the person who manages the trust and makes decisions regarding investments and distributions and (3) beneficiary – again, also you, the person for whom the trust was created and who receives the benefits of the trust.
The astute reader may be wondering how anonymous the Claiming Trust is when your name is listed as grantor, trustee, and beneficiary throughout the trust document. It’s possible to create an irrevocable trust and name a trusted family member, attorney, or financial advisor as trustee who’s only function is to immediately transfer the trust assets into the Bridge Trust for which you will have control. For the winner who wants to remain as private as possible, this is a potential strategy, but for most, I don’t recommend giving up control.
Although most revocable trusts use the Social Security Number of the grantor (i.e., you – the person setting up the trust), you want to avoid this. Why? State lottery commissions are state agencies, and as such, all of their records are subject to the Freedom of Information Act, which makes it easy for a reporter (or anyone else!) to request these documents and trace the Social Security Number back to you. For greater anonymity, depending on the state lottery commission’s rules, you may be able to have a limited liability company (LLC) act as the grantor.
Using this strategy, the winning lottery ticket would be owned by the LLC and the LLC would be the grantor of the Claiming Trust. If a nosy reporter gets a hold of the Claiming Trust, they wouldn’t see your name but would see the name of the LLC instead. However, some states have reporting requirements when forming an LLC that would identify the name of the person who owns the LLC. For example, in California, a Statement of Information for domestic and foreign corporations must be filed within 90 days of forming the LLC, which requires the complete name and addresses of its managers and officers. This is where it is important to work with an attorney well versed in the laws of your state.
Second Use a Bridge Trust
The lottery proceeds are paid into the Claiming Trust and then almost immediately transferred into the Bridge Trust. The reason the lottery proceeds aren’t simply paid to the Bridge Trust is because the Claiming Trust helps to shield the true identity of the winner – it is cloaked to avoid determining the true owner. The Bridge Trust, however, is not designed to protect the identity of the winner. The details of this trust are not subject to Freedom of Information Act requests, so your name can be listed as grantor and trustee, but because the trust name will be listed as beneficiary of the Claiming Trust, which is subject to Freedom of Information Act requests, it’s best not to name the Bridge Trust with personally identifiable information.
It’s called a “bridge” trust because this is the vehicle that holds and manages the assets for you while you determine if there needs to be more complex estate, charitable, and asset protection trusts/entities. But if you do not need more complex planning, the Bridge Trust is perfectly sufficient as your “living trust” and to serve as your main estate planning document, because unlike the Claiming Trust, it will have all of the necessary estate planning provisions.
