Pooling your resources with coworkers at the office to play the weekly lottery may seem like a harmless pastime when you're buying tickets, but have you thought about what would happen if you actually won the jackpot? Congratulations! Your little lottery club is no longer just managing a few dollars. It's now responsible for an entire fortune.
Creating a formal lottery club before you win may seem silly to some people. After all, the odds of winning are always remote, like one chance in 300 million, but if you're going to play the lottery, you have to be optimistic that one day your efforts will pay off. Otherwise, what's the point? Set the rules for your club now and avoid the headaches later so you can focus on what you're going to do with your newfound riches.
Why You Should Formalize Your Lottery Club
The advantage and disadvantage of forming a lottery club are proportional to each other. On one hand, you can get more tickets when you pool your resources, and on the other hand, you each get less prize money if you do win. Most people see the logic in this and won't have a problem with it even if you do win that billion dollar jackpot one day.
Where things become troublesome is when a ticket does turn out to be the big winner. Then, the questions start to arise. Who was in the club this week? Who contributed? Was the ticket part of the club's tickets, or was it someone's personal ticket?
In a famous 2009 case, a construction worker in New Jersey abruptly quit his job, claiming that the lottery ticket he had, worth $38.5 million, was his alone. His co-workers claimed it was theirs as a group. After years in court, the money was eventually split.
How to Set Up Rules for Your Lottery Club
To work well, your lottery club should decide on the rules before you win anything. You don't need a lot of rules or terms and conditions, and in most cases, the rules can fit on a single sheet of paper. Once you have agreed on the rules, have everyone sign the list.
The rules should include the names of the group members and how the prize will be divided. State how everyone will be notified in the event that you do win. The rules should explain what happens if a regular player wasn't around for a week and didn't contribute to that week's tickets. You could specify that people who don't contribute their money before the tickets are purchased are not included in those tickets, or another option is to give them a grace period of one or two weeks.
Elect a group spokesman or club manager who will be responsible for accepting the winnings and dividing the cash with the rest of the group. Before every draw, you should make copies of the tickets for everyone, including the back of the tickets when they have identifying numbers on them.
State Laws and Lottery Requirements
The laws regarding lottery clubs are different in each state, as are the terms and conditions of each lottery, so you should research these before drawing up the rules for your club. In most cases, if members of your club don't mind posing for photos and having their names in the news, you shouldn't have a problem collecting your winnings and dividing them.
If you want to be anonymous, however, there could be a problem. Lotteries rely on news stories about their winners to promote the lottery, so it's only understandable that they would prefer winners to not be anonymous. In some states, being anonymous may not be an option.
In Michigan, if your club has its rules or bylaws written down and a representative has been chosen, then the state will issue each member a W-2G form showing his portion of the prize and the amount of tax withheld. In New York, the governor stated in 2018 that if a club wishes to keep its members anonymous, they must form an LLC before accepting the prize money.
A published author, David Weedmark has advised businesses on technology, media and marketing for more than 20 years and used to teach computer science at Algonquin College. He is currently the owner of Mad Hat Labs, a web design and media consultancy business. David has written hundreds of articles for newspapers, magazines and websites including American Express, Samsung, Re/Max and the New York Times' About.com.