Estate Planning

DEATH, TAXES, AND WINNING THE LOTTERY

By Hull & Hull LLP

Two certainties and a long-shot.

The Toronto Star reported on January 4, 2009 that on the day Donald Peters died, he unknowingly provided financial security for his wife of 59 years, and for their family.

Peters bought two Connecticut Lottery tickets on November 1, 2008. He died of a heart attack later that day. His wife, in her grief, didn’t check the tickets until some time later. In fact, she states that she almost through them out before checking them. On January 2, 2009, she collected the winning prize of $10,000,000 (U.S.).

Considering this matter from an estate administration angle, a number of potential questions or issues arise.

For example, in Ontario, would Estate Administration Tax (“E.A.T.”) be payable on the winnings under the Estates Administration Tax Act? E.A.T. on $10,000,000 would be approximately $150,000.

E.A.T. under the Act is payable based on the “value of the estate”, the stripped-down definition of which is the value of all the property that belonged to the deceased at the time of his or her death. Presuming the lottery took place after death, the value of the ticket at the date of death would likely be its face value or purchase price. Until the lottery takes place, a $1 ticket is, in most cases, only worth $1. (Believe me, I’ve tried to sell them for more, but my family wouldn’t pay my asking price, no matter how lucky I told them the ticket was.)

However, if the draw was pre-death, but the ticket wasn’t checked until post-death, then one would presume that the winnings would need to be included as property belonging to the deceased at the time of death, and E.A.T. would be payable on the winnings.

Good luck and good health,

Paul Trudelle

Full post as published by Toronto Estate Law Blog on January 11, 2009 (boomark / email).