SENATE, No. 2282
STATE OF NEW JERSEY
INTRODUCED DECEMBER 1, 1997
By Senator CIESLA
An Act clarifying that State Lottery prizes may be assigned under certain circumstances and amending P.L.1970, c.13.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 13 of P.L.1970, c.13 (C.5:9-13) is amended to read as follows:
13. [No] a. The right of any person to a prize drawn shall not be assignable, except [that] as permitted by this section.
b. The payment of any prize drawn may be paid to the estate of a deceased prize winner [, and except that any] upon receipt by the State Lottery of a certified copy of a order appointing an executor or an administrator.
c. Any person [pursuant to an appropriate judicial order] may be assigned and paid the prize to which the winner is entitled pursuant to a judicial order of the New Jersey Superior Court or a federal court having jurisdiction over property located in this State provided that the order pertains to claims of ownership in the prize drawn, division of marital property in divorce actions, bankruptcy, child support, appointment of a guardian or conservator, or distribution of an estate.
d. Any person may be assigned and paid a prize to which the winner is entitled pursuant to a judicial order of the New Jersey Superior Court or a federal court having jurisdiction over property located in this State provided that the order contains at least the following findings:
(1) the full legal name, address, social security number or taxpayer identification number and, if applicable, resident alien number of the winner;
(2) the full legal name, address, social security number or taxpayer identification number and, if applicable, resident alien number of the assignee;
(3) the date on which the winner won the prize;
(4) the date on which the winner claimed the prize;
(5) the gross amount of the prize drawn before application of withholding taxes;
(6) the gross amount of payments to be made to the winner by the State Lottery before application of withholding taxes;
(7) the dates of the payments to be assigned and the amount of the specific payments to be assigned on each date;
(8) the identity of the winner's spouse, if any, and the interest of the spouse in the prize;
(9) the identity of any other co-owner, claimant or lienholder and the amount of the interests, liens, security interests, prior assignments or offsets asserted by such party;
(10) that the interest rate or discount rate, as applicable, and all fees and costs and other material terms relating to the assignment are expressly and clearly included in all material documents and in all documents that include any obligations of the prize winner;
(11) that the interest rate or discount rate, as applicable, associated with the assignment does not indicate overreaching or exploitation and does not violate any laws of usury of this State;
(12) that the winner has reviewed and understands the terms of the assignment;
(13) that the winner understands that the winner will not receive the prize payments, or portions thereof, for the years assigned;
(14) that the winner has agreed to the assignment of the winner's own free will without undue influence or duress;
(15) that the winner has retained, and consulted with, independent legal counsel who has advised the winner of the winner's legal rights and obligations;
(16) that the winner has retained, and consulted with, an independent tax advisor concerning the tax consequences of the assignment; and
(17) that the winner does not seek assignment for purposes of evading creditors, judgments or obligations for child support.
e. Before a winner is legally bound, by agreement, contract or otherwise, and prior to the issuance of an order pursuant to subsection d. of this section, the assignee shall provide the winner with all material documents which shall be binding on the assignor, including documents evidencing obligations of the winner. All documents shall include a notice of the assignor's right to cancel the agreement which shall be located in immediate proximity to all spaces reserved for the signature of the winner in bold-faced type of at least 10 points and which shall provide as follows:
"You have the right to cancel this assignment without any cost to you until midnight three business days after the day on which you have signed an agreement to assign all or a portion of your prize.
"Cancellation occurs when you give notice by regular first class mail, postage prepaid, to the assignee at the address listed at the top of the first page of this document that you wish to cancel the assignment. Notice is deemed given when deposited in a mailbox."
f. If the State Lottery determines that a judicial order granting an assignment, issued pursuant to subsection d. of this section, is complete and correct in all respects, the State Lottery shall, not later than 10 days after receiving a true and correct copy of the filed judicial order, send the winner and the assignee written confirmation of receipt of the court-ordered assignment and of the State Lottery's intent to rely thereon in making future payments to the assignee named in the order. The State Lottery shall, thereafter, make all payments in accordance with the judicial order. No change in the terms of any assignment shall be effective unless made pursuant to a subsequent judicial order.
g. The State Lottery may impose a reasonable fee on an assignor to defray any direct or indirect administrative expenses associated with an assignment.
h. A winner shall not be permitted to assign the final annual prize payment.
i. The State Lottery and the State are not parties to assignment proceedings.
j. The State Lottery and the State shall comply with, and rely upon, a judicial order in distributing payments subject to that order.
k. A winner may pledge or grant a security interest in all or part of a prize as collateral for repayment of a loan pursuant to a judicial order containing the findings required by subsection d. of this section which the court deems relevant the pledge or grant.
l. Except where inconsistent with the provisions of this section, the New Jersey Consumer Fraud Act, P.L.1960, c.39 (C.56:8-1 et seq.), shall apply to all transactions under this section.
m. The court shall cease to approve assignments pursuant to subsection d. of this section if:
(1) the United States Internal Revenue Service issues a technical rule letter, revenue ruling, or other public ruling in which it is determined that because of the right of assignment provided by subsection d. of this section, prizewinners who do not exercise the right to assign prize payments would be subject to an immediate income tax liability for the value of the entire prize rather than annual income tax liability for each installment when received; or
(2) a court of competent jurisdiction issues a published decision holding that because of the right of assignment provided by subsection d. of this section, prizewinners who do not exercise the right to assign prize payments would be subject to an immediate income tax liability for the value of the entire prize rather than annual income tax liability for each installment when received.
n. Upon receipt, the director shall immediately file a copy of a letter or ruling of the United States Internal Revenue Service or a published decision of a court of competent jurisdiction, described in subsection m. of this section, with the Secretary of State. No assignment shall be approved pursuant to subsection d. of this section after the date of such filing.
o. The director shall be discharged of all further liability upon payment of a prize pursuant to this section.
(cf: P.L.1970, c.13, s.13)
2. This act shall take effect immediately.
This bill would clarify existing law to permit any person who has the right to receive a State Lottery prize to voluntarily assign that right to another person. A person who wishes to make a voluntary assignment of periodic payments would apply to the Superior Court, or to a federal court having jurisdiction over property located in New Jersey, for an order approving the transaction. The bill contains provisions intended to protect a winner's rights and ensure that a winner makes an informed decision when making an assignment. The bill would also allow a winner to pledge or grant a security interest in all or part of a prize as collateral for repayment of a loan.
The bill provides that voluntary assignments would cease to be approved if the Internal Revenue Service issues a ruling, or a court of competent jurisdiction issues a published decision, to the effect that because voluntary assignments are allowed, prize-winners who do not make an assignment would be subject to an immediate tax liability for the value of the entire prize rather than an annual tax liability for each installment when received.
The bill would enable a person who is receiving a lottery prize through annual installments over a period of years to instead gain access to a lump sum which may be needed for such purposes as extraordinary medical expenses, the purchase of a home, or investment in a business. Senior citizens, in particular, may prefer to receive a lump sum payment instead of annual installments. In addition, depending upon an individual's other income, assets, investment plans, and obligations, it may be more advantageous from a financial planning perspective to exchange annual payments for a single large payment. Similar legislation has been enacted by 11 other states and the District of Columbia.
Clarifies that State Lottery prizes may be assigned under certain circumstances.