John Robinson, a longtime resident of Munford, Tennessee, was one of three ticket holders winning the world-record $1.6 billion Powerball jackpot. PHOTO: AP

In January three Powerball ticket holders won the record $1.6 billion jackpot and will face some lifechanging challenges.

Some of the common issues that lottery winners and overnight millionaires will have are discussed by Steven Chung, a tax attorney in Los Angeles in this shortened article. (Go here for full version).

Ticket Disputes

A large jackpot involving multiple people can lead to disputes. For example, let’s say I gave a friend $20 to buy 10 quick pick lottery tickets. He purchases 10 tickets for me and 10 tickets for himself but holds on to the tickets until after the winning numbers are announced. One of these 20 tickets had the winning number. My “friend” tells me that my ticket lost while keeping the winning ticket for himself.

Steven ChungAnonymity

Most states require the names of winners to be public to show that the lottery system is not rigged. While some may relish the attention, most winners will want to disappear until the hype dies down. They will want to know how to establish residences using other people’s names, business entities or pseudonyms.

Taxes

Lottery winnings are taxable income to the federal government. But some states, such as Florida, have no state income tax. Also, some states, like California exempt lottery winnings from state income tax. They will want to know if they owe any additional taxes at the end of the year.

Estate Planning

Lottery winners will purchase businesses, invest in real estate, and other assets. So they will need to set up an estate plan to ensure these assets are managed by people they can trust and distribute to beneficiaries in case of death or disability.

Employment Issues

While some winners will quit their day job, others will want to continue working. Unfortunately, they can become lawsuit magnets from clients and co-workers. Lottery winners should be advised about the risks of continuing to work and what steps they should take to protect themselves.

Frivolous Lawsuits

Lottery winners will eventually face a frivolous lawsuit. For example, an ex-spouse might sue for a share of the winnings because three of the winning numbers—4, 27, and 10—happens to coincide with the anniversary of their divorce (April 27, 2010). Most of these lawsuits will hinge on the hope that it will settle quickly.

READ FULL REPORT: Lawyerist.com