How to give money to family after winning the lottery

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Financial Advisory
September 28, 2020
minute read

The important things you need to consider before you make any big decisions on where your lottery winnings will go

For many Australian families, winning the lottery is the dream. It’s the combined sum of buying lottery tickets, optimism, and a rollercoaster of emotions.

But a big lottery win comes with its own special legal and financial challenges, particularly when you’re thinking about how to give money to your family after winning.

Whether it’s a comfortable bonus or a life-changing windfall, Liston Newton Advisory can help you manage your lottery winnings. Get in touch with our financial advisory team today to discuss your specific situation, and see how you can make smarter decisions that let you enjoy your winnings for the long-term.

What to do when you win the lottery

If you ever do hit the jackpot, it’s a truly amazing experience that you should savour. It’s important to remember to take things slow. You don’t need to make a decision on what to do with your money straight away; it’s not going anywhere.

Until you do make that decision, the advice we typically give to lottery winners is to place it all into a high-interest bank account. Then, take the time to think clearly and carefully about what you plan to do with it.

It’s safe and secure, earning you interest, so it’s good practice to clear your head, and give yourself some space before you make any big decisions. Then, when you're ready, we recommend seeking professional financial advice on what to do next.

The experts can answer all your questions

The first thing you'll want to know is whether you pay any tax on your lottery winnings. And, if you want to gift money to your family, you'll need to know whether this will be taxed, too.

The answer? No. You don’t pay tax on your lottery winnings, and any money gifted to family and friends is free of tax. The only tax you or the gift recipients will pay is on any earnings from this money.

However, there are a number of important considerations you need to address when giving money to your family after winning the lottery.

How to gift money to your family after winning the lottery

Much like asking about tax, one of the most common questions we’re asked is how to give money to your family after winning the lottery.

There are a few factors at play when thinking about this question. First, you need to determine what the right amount is. When you win the lottery, it’s your money, so you need to make sure you actually have enough to be financially free before you start giving it away.

The best way to do this is to seek professional advice and perform some financial modelling on your specific situation.


You win the lottery and decide that you’re going to pay off all your debts, but still have enough income to live comfortably.

You have a home loan of $700k, and you want to live on a sum of $200k per year for the rest of your life.

Financial modelling can determine how much you’d need to invest to earn $200k each year. If we assume you can earn 4% per year on investments, you would need around $5 million to be invested in a portfolio.

But you can’t forget about taxes. If you earn $200k per annum, you’ll pay approximately $67k in taxes each year.

This is where good advice will help. You can structure your investment under a family trust structure in order to minimise the tax you pay. You might also need to invest a larger amount to compensate for the taxes you’ll need to pay.

In this circumstance, you’ll need to invest $7 million instead. Then, when you earn 4% interest, you’ll generate $280k, which allows for $80k to be paid as tax each year.

But every situation is different, so be sure to get good advice that actually applies to your unique situation.

You don’t need to give it all away at once

Another consideration is to choose not to give any money to your family immediately. Instead, you can choose to invest it carefully, and then give away the income each year, preserving the original lump sum.


Say you have three family members to whom you want to gift your winnings. If you give them $100k each immediately, you lose $300k.

Instead, you can choose to invest $2.5 million into a portfolio, which will then earn $100k per year for the foreseeable future. This way, each family member can instead get $100k each, every three years, or $33k every year if you decide to distribute the money.

Using this method you won’t lose any of your original lump sum, and you’re still able to help out your family. More so, in fact, as this provides them with long-term support, rather than a once-off payment.

If invested correctly, the original lump sum might even grow over time, and end up exceeding the original amount that you invested. Done this way, and depending on how long you do this for, you might even be able to provide for your kids, and your grandkids, for years to come.

Making charitable donations

If charitable giving is a focus of yours, then there are smarter ways to go about this too. Instead of donating large lump sums, there are the options of setting up a foundation, or even your own charity, which helps you donate money for the long term.

If you choose to go down this route, we suggest speaking with your financial adviser to ensure to find out more about what's involved in setting up a charity or foundation.

Be aware of Centrelink benefits

One thing to be aware of when gifting money to family members is whether they have any existing Centrelink benefits or not.

A common oversight we see is the impact that such a gift has on a person’s Centrelink benefits. For example, gifting money to a parent on an aged pension increases their assets, which can mean they exceed the assets test, and no longer qualify for the pension. An immediate gift of $200k, which seems like a good idea in the short term, can effectively kill their ongoing benefits.

The same goes for any number of other Centrelink benefits. So keep this in mind when gifting lottery winnings to your family, and take the time to plan out how you’re going to gift before actually doing it. It may work out to be more beneficial to give them smaller amounts over a period of years rather than one big lump sum.

Keep marital risk in mind

To be clear: we’re not saying that winning the lottery will damage your marriage. Instead, consider the relationships of those to whom you’re considering gifting money. There’s always the risk that the family member or friend that you gift money to may have a marriage separation in the future.

In these situations, that generous gift you give your sister could be at risk if her marriage breaks down, and assets are split up by the family court. If her marriage doesn’t last, the generous $1 million you gifted her could turn into $500k.

One way to avoid this difficult problem is to have the gift documented as a loan. You can draw up a loan agreement that legally classifies your gift as such. A loan refers to a sum of money that’s being borrowed with the intention of being paid back, with or without interest.

So if the loan agreement is written correctly, it’s possible to ensure that the money will be protected in the circumstance of a marriage breakdown.

The final word

The important thing to do when you win the lottery is to take the time to let it sink in. Stop, breathe, celebrate, and then give yourself the time and space to determine the smartest way to manage your money.

Then, it’s up to you how you choose to give money to your family after winning the lottery. But be sure to get the right financial advice to make sure you’re doing it in the smartest way possible.

If you'd like to consult with our financial advisors in person, step into our offices in Geelong, Mallee, Malvern, the Gold Coast, Port Macquarie or Melbourne.

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