South Florida Estate Planning Law

Some Guys Have All the Luck: Greenwich Wealth Managers Win $254 Million Powerball Lottery

I saw this story this morning that made me shake my head in wonder, and in a little bit of jealousy. Apparently, three money managers from Greenwich, Connecticut won $254 million in the Powerball lottery. If you don't know, Greenwich is a New York City suburb and one of the richest in the country. Apparently, the three money managers are the founder and employees at an $82 million wealth management firm. So these aren't the typical lottery winners - a 63 year old married couple from Des Moines where he insists that he is not going to quit his job at the tractor factory.

According to the story, the winning numbers were drawn on November 2, but the three men didn't come forward until yesterday. Also, “the three men will accept an after-tax payment for their winnings of about $104 million and collect it through an entity that they formed called the Putnam Avenue Family Trust.”

The Putnam Avenue family trust? What the heck is that? And why did he wait so long to come forward?

Aha! An estate planning angle.

There are a number of reasons that lottery winners should elect to be paid through an entity such as an LLC or Partnership. Generally, instead of having one individual win the lottery, their entire family claims it through a partnership that they formed, with family members having varying interests in the entity. This allows for there to be lower income taxes, because each person gets to take advantage of their lower marginal rate first. Also, it can help effectuate estate planning by reducing the number of intergenerational transfers and locking up the assets in a creditor protected entity.

But there are a few things about this case that I don't know. It is a bit unusual to collect the winnings in a trust and not a limited partnership or limited liability company. A self-settled trust generally does not really provide any layer of asset protection. Furthermore, there are three separate families here. Why did all three of them have the funds distributed to one trust instead of dividing it equally between them beforehand? You would think that each person would want to have their own share for their family. Again, each of the three of them shouldn't have collected the money directly, but each through a family entity.

Here is what I suspect though, and it's actually pretty smart on their lawyer's part. I would guess that the Putnam Avenue Family Trust is merely a temporary holding entity. After the trust collects the funds, it will then shortly thereafter distribute the shares among the three winners (or their newly formed legal entities). What are the names of these new entities? Where were they formed? What do they provide? We don't know, and that's the point.

Smart planning.

Lucky bastards.

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Law Offices of David A. Shulman, P.L
Fort Lauderdale, FL