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are lottery winnings subject to child support

What Percentage of Lottery Winnings Can They Take for Back Child Support?

If Owing Back Taxes or Child Support, Will the Government Take .

Winning the lottery may seem like a dream come true, but there can be some complications. If there is a child support order and back support owed, you may not see all of the big payoff. Most states have laws allowing the seizure of lottery winnings for certain financial obligations, and child support is one of them.

Withholding on Winnings

State lottery authorities will pay out the winnings from your lucky lottery ticket. Before they cut the check, however, they will withhold for income taxes (federal and state), and research other debts you may have. They may have the authority to pay on court judgments, back taxes, and student loans, which carry a federal guarantee. Most states also allow their lottery agencies to verify and withhold past-due child support in any amount. For example, the state of New Jersey runs such a check on anyone who wins more than $600 from any lottery.

Interception Procedure

Each state writes its own law on the interception of lottery winnings. California, for example, has set up the Interagency Intercept Collection Program. A child-support agency with a delinquent account will submit the information to the IICP, which keeps the information on its books. The lottery agency submits the Social Security numbers of lottery winners; other triggering events could be a payment from the state’s unclaimed property office, or the payment of a tax refund from the state tax authority. Local child-support agencies have first priority in this system; non-local support orders come second.

No Limit Collections

The states don’t place a limit on the percentage of past-due support that can be subject to an intercept. If the lottery pays $25,000 and the past-due child support is the same amount, then the entire prize can be seized. This general rule will prevent a situation where a multimillion-dollar winner is only required to satisfy a few thousand dollars of past-due support, if state law happened to limit the percentage that could be paid.

Modification

In addition, a lottery win can lead to a change in current child support that is due. The custodial parent can petition the court for a modification of the support order. In many states, a substantial change in the financial circumstances of the parent who’s paying can be valid grounds for a change in support. Since a lottery prize is considered income (and taxable income, at that), it will allow a change in the calculation of the monthly child support amount. For that reason, lottery winners who have child support in the picture would be wise to consult an attorney versed in child support and marital separation agreements.

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Winning the lottery may seem like a dream come true, but there can be some complications. If there is a child support order and back support owed, you may not see all of the big payoff. Most states have laws allowing the seizure of lottery winnings for certain financial obligations, and child support is one of them.

$5.3 MILLION LOTTERY WINNER HIT FOR MORE CHILD SUPPORT

When Jesse Palacios filed for divorce in January 1990, he listed himself as an unemployed truck driver with limited assets, and was therefore ordered to pay only $325 a month in child support for his two daughters.

He did not mention a $5.3 million-winning lottery ticket, and that, the Illinois Appellate Court decided Monday, doesn’t seem quite fair.

The divorce suit was filed a week after Palacios hit on all six winning numbers in the Illinois State Lottery, making him the owner of a ticket worth $5.3 million. Two months later, Judge Michael Close granted the divorce and ordered Palacios-based on his unemployed status-to pay $325 a month in child support for his two children.

Then came disclosure of the winning ticket, and the court now is taking $2,500 a month out of Palacios’ lottery checks pending a trip back to Domestic Relations Court by Palacios and his ex-wife Constance.

The Appellate Court ruled that the ticket purchase by Palacios, formerly of Chicago and now living in the Downers Grove area, was joint property. The court ordered the issue of property settlement be sent back to Cook County Domestic Relations Court.

Palacios hit on the Jan. 6, 1990 drawing, but he didn’t turn in the winning ticket until October 1990.

According to Donald Birner, the wife’s attorney, Palacios filed for divorce within a week of winning, but he made no mention of the lottery windfall.

In October, according to court records, he claimed that he was going through old lottery tickets and found the winning ticket. His former spouse argued he had hid it, hoping to keep the money to himself.

After Constance Palacios found out about the winning ticket, she asked that the case be reopened, and Close reset child support payments at $2,500 a month. The payment has been deducted from the regular lottery check on order by Close.

Attorneys for Jesse Palacios argued that the couple had been separated at various times during their marriage and previously agreed to a maintenance schedule, which they believed precluded the former wife from claiming the lottery ticket as joint property.

When he claimed the winning lottery ticket in October 1990, he was accompanied with his fiance, with whom, he claimed, he had a partnership in which she was getting 10 percent of the winnings. However, court documents indicate the fiance subsequently admitted that she and Palacios had lied about the date when they realized the ticket was a winner.

Jesse and Constance Palacios were married in 1973, were separated in 1976, resumed their marriage from 1980 to 1987, and then separated again.

In announcing the decision on Monday, Appellate Court Justice Everette Braden wrote the initial settlement was “made in contravention of both fair dealing and good faith.”

Neither of the Palacios could be reached for comment.

The Appellate Court ordered the case be returned for action to Judge Close. In Illinois, marital assets are traditionally divided equally between divorcing partners.

$5.3 MILLION LOTTERY WINNER HIT FOR MORE CHILD SUPPORT When Jesse Palacios filed for divorce in January 1990, he listed himself as an unemployed truck driver with limited assets, and was ]]>