Woman who won £176,000 on lottery only took home £126,000 due to little-known rule

They only took home about two-thirds of the winnings

Ashley Smith, from Kentucky, couldn't believe it when she won  $224,000 (£176,000) on an online lottery game one night.

Speaking about the win, Ashley said: "I was just waiting for the kids to go to sleep and decided to play."

Her husband added that when she screamed that she had won, he thought she "was faking."

The next day, the couple and their two children all got in the car and drove to the Kentucky Lottery headquarters.

But they ended up cashing a cheque for $64,000 less, taking home $160,409 (£126,200).

This was because they went for the option of receiving a lump sum payment, so had to pay tax on the amount.

The money was a much-needed windfall for Ashley as well, as she revealed she had recently totalled her car, the Mirror reports.

In a press release, the family said they'd be spending most of the money on bills.

Lottery winners in the US have two options when it comes to how they want to receive their winnings.  They can either collect them in a taxed lump-sum or choose annual untaxed payments for several years - 29 in the case of Kentucky Lottery.

The annuity payments are a handy way of making sure you don't spend the money all at once, although you do have to remember to claim your winnings every year when you file taxes.

Financial advisors have differing opinions on what the best option for lottery winners is.

Some recommend taking the tax hit and collecting the lump sum, whilst others think the annual payments are the safer option.

The vast majority (90 per cent) of winners take the lump sum, but legal expert Andrew Stoltmann highlighted that receiving that much money can be overwhelming for some people, and pointed out that a third of winners go bankrupt

He told the US Sun: "They then take this massive sum of money and they just don't really know what to do with that."

He suggested the annuity payments make it less likely for winners to blow all the money at once and make financial mistakes.

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