With a half-billion-dollar multistate lottery jackpot up for grabs, plenty of folks are fantasizing how to spend the money. But doing it the right way ‚?? protecting your riches, your identity and your sanity ‚?? takes some thought and planning.
Making sure you don‚??t blow the nation‚??s largest-ever lottery jackpot within a few years means some advice is in order before the Mega Millions drawing Friday, especially if you‚??re really, really, really lucky.
Q: What do I do with the ticket?
A: Before anything else, sign the back of the ticket. That will stop anyone else from claiming your riches if you happen drop it while you‚??re jumping up and down. Then make a photocopy and lock it in a safe. At the very least, keep it where you know it‚??s protected. A Rhode Island woman who won a $336 million Powerball jackpot in February hid the ticket in her Bible before going out to breakfast.
Q: What next?
A: Relax; breathe; take time to think about your next move. Don‚??t do anything you‚??ll regret for the next 30 years, like calling your best friend or every one of your aunts, uncles and cousins. It doesn‚??t take long to be overwhelmed by long-lost friends, charities and churches wanting to share your good fortune. You‚??ve waited a lifetime to hit the jackpot; you can wait a few days before going on a spending spree.
Q: So whom should I tell first?
A: Contacting a lawyer and a financial planner would be a lot wiser than updating your Facebook status. Make sure it‚??s someone you can trust and, it‚??s hoped, dealt with before. Oklahoma City attorney Richard Craig, whose firm has represented a handful of lottery winners, says it‚??s essential to assemble a team of financial managers, tax experts, accountants and bankers.
Q: Remind me, how much did I win?
A: As it stands now, the Mega Millions will pay out a lump sum of $359 million before taxes. The annual payments over 26 years will amount to just over $19 million before taxes.
Q: How much will I pay in taxes?
A: This partly depends on where you live. Federal tax is 25 percent; then there‚??s your state income tax. In Ohio, for example, that‚??s another 6 percent. And you might need to pay a city tax depending on the local tax rules. So count on about a third of your winnings going to the government.
Q: Should I take the cash payout or annual payments?
A: This is the big question, and most people think taking the lump sum is the smart move. That‚??s not always the case. First, spreading the payments out protects you from becoming the latest lottery winner who‚??s lost all their money. Don McNay, author of the book ‚??Son of a Son of a Gambler: Winners, Losers and What to Do When You Win the Lottery,‚?Ě says nine out of 10 winners go through their money in five years or less.
Q: But what if I‚??m good at managing the money?
A: Invested properly, the lump sum option can be a good choice. There‚??s more planning that you can use to reduce estate taxes and other financial incentives. Others, though, say that with annual payments, you are taxed on the money only as it comes in, so that will put you in a lower tax bracket rather than taking a big hit on getting a lump sum. And you still can shelter the money in tax-free investments and take advantage of tax law changes over the years.
Q: Should I try to shield my identity?
A: Absolutely. This will protect you from people who want you to invest in their business scheme or those who need cash in an emergency. Lottery winners are besieged by dozens of people and charities looking for help. ‚??There are people who do that for a living. Unless you understand that, you can become a victim very quickly,‚?Ě says Steve Thornton, an attorney in Bowling Green, Ky., who has represented two jackpot winners.
Q: So how can I protect myself?
A: Again, it somewhat depends on where you live. In Ohio, you can form a trust to manage the money and keep your winnings a secret. In other states, you can form a trust but still be discovered through public records. And a few states require you to show up and receive your oversized check in front of a bunch of cameras, making it impossible to stay anonymous. Thornton set up a corporation in the late 1990s to protect the identity of a client in Kentucky who won $11 million.
Q: Is it OK to splurge a little?
A: Sure, it‚??s why you bought a ticket, right? But remember that if there‚??s a new Mercedes-Benz in the driveway, your neighbors will probably be able to figure out who won the jackpot.
Q: How much should I help my family and others?
A: It‚??s certainly a natural desire to help relatives in need and take care of future generation. But use extreme caution when giving out your money. Jack Whittaker, a West Virginia contractor who won a nearly $315 million Powerball jackpot in 2002, quickly fell victim to scandals, lawsuits and personal setbacks. His foundation spent $23 million building two churches, and he‚??s been involved in hundreds of legal actions. ‚??If you win, just don‚??t give any money away, because the more money you give away, the more they want you to give. And once you start giving it away, everybody will label you an easy touch and be right there after you. And that includes everybody,‚?Ě Whittaker said five years ago.
For the first time in U.S. lottery history, an estimated jackpot has reached half-a-billion dollars.
That would be a 5 followed by eight zeros ‚?? which looks like this: $500,000,000.
If you had the time and energy to pile all that money in a single stack of $1 bills, it would start at the bottommost spot of the ocean and tower above Mount Everest.
Even with the lump sum payout of $359 million, paid out at the rate of $1 every minute, you wouldn‚??t get the entire amount owed for over 600 years.
Your odds of winning with a single ticket are 1 in 175.7 million. You‚??re about 200 times more likely to be struck by lightning this year.
For those of you keeping score at home, the previous lottery record was a $390 million Mega Millions jackpot won March 6, 2007, by 2 tickets.
By comparison, tonight‚??s Powerball jackpot is a ‚??paltry‚?Ě $50 million.