The lottery’s hidden secret: Billions in unclaimed prizes

Personal Finance FOXBusiness

Powerball jackpot reaches $700M

FBN's Tracee Carrasco on the big jackpot for the Powerball lottery.

Whether you win or lose the country’s second largest lottery jackpot in history on Wednesday night, it would serve you well to check your ticket regardless because billions of dollars go unclaimed in prizes each year.

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Americans forego about $2 billion in unclaimed prizes each year, the founder of mobile lottery app told FOX Business. And the higher the drawing, the higher the likelihood there will be multiple, smaller unclaimed prizes.

Last year alone, in California, unclaimed winnings registered at more than $24 million, according to state gaming officials. While winners in Michigan raked in $1.9 billion in claimed prizes, lotto players in the state missed out on winnings worth $28.5 million. Meanwhile, in the state of New York, unclaimed lotto winnings for fiscal year 2016 through fiscal year 2017 were $74 million. In the year prior, they were more than $103 million.

Sometimes jackpot winners never claim their prizes. In 2002, a Mega Millions windfall worth $63 million went unclaimed in New York.

What happens to the unclaimed prize amounts varies from state to state. For example, in Michigan, the money goes to the state’s School Aid Fund, the Michigan lottery’s beneficiary. In other cases, states will put the unclaimed money back into the prize pool to increase payouts for future games, according to the National Association of State and Provincial Lotteries.

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The amount of time allotted for claiming the winning prize varies among states, however it typically ranges from six months to one year.

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Wednesday’s lottery jackpot of $700 million is the second largest in the game’s 25 year history. A winner that opts for a cash payout would receive $433.3 million, after taxes. The IRS will automatically take 25% federal withholding of the winnings and in some states, even more.

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