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Once again, the Mega Millions jackpot has risen higher.
The highest prize is now an incredible $ 850 million – the third largest in lottery history – after no ticket matches all the numbers drawn on Friday night. Then there’s Powerball: the jackpot is estimated at $ 640 million for the draw on Saturday night.
Of course, the chance of not winning either game is in your favor: the chance of a single ticket matching all six figures is 1 in 302 million for Mega Millions and 1 in 292 million for Powerball.
It is nevertheless worth considering how you would handle such a windfall if you were to beat the odds.
Jackpot winners usually get six months to a year to claim their prize, depending on the state where it was purchased. This usually means that it is not necessary to rush to the headquarters of the lottery.
In other words, winners need to take a deep breath.
Big money equals big emotions
Whoever ends up hitting some jackpot must be prepared for a rollercoaster of emotions.
Experts believe that once the initial excitement of winning the jackpot has disappeared, the magnitude of their windfall could subside.
“For everyone who experiences newly created wealth … there are feelings of disruption and a sense of overwhelm,” said Valerie Galinskaya, a managing director and head of the Merrill Center for Family Wealth.
For all who experience newly created wealth … there are feelings of disruption and a sense of overwhelm.
Of course, you do not have to go it alone.
Given the sheer size of these jackpots, winners must put together a team of experienced professionals – including a lawyer, a CPA and a financial adviser – to help them explore the windfall.
“You want to hire the right advisors who can not only give good advice but also advice tailored to your needs and wants,” Galinskaya said.
Protect your card and identity
You need to make a copy of your ticket, place it in a safe place, ie a locker or a safe at a bank, and you resist the urge to share your news with everyone in your life.
“Do not talk to people about it right away, except for your immediate and trusted family,” certified financial planner Jim Shagawat, a New Jersey partner advisor, told AdvicePeriod of Los Angeles.
Furthermore, if possible, you should protect your identity when claiming the jackpot. Although the standard advice is to sign the back of the ticket, it may remain anonymous if the laws of the state allow you to establish a corporation with trust or limited liability to claim the windfall instead of it in your own name. do.
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If your state laws require your name to be made public, it’s worthwhile to prepare how you can respond when others engage in your conversation, Galinskaya said.
“You say ‘I’m really grateful and we’re still working through what that means for us,’ she said.
Prepare for the tax bill
For the $ 850 million Mega Millions jackpot, the cash option – which most winners choose instead of an annuity – is $ 628.2 million.
Before it reaches you, however, 24% – or $ 150.8 million – will be withheld for federal taxes. You can also count on Uncle Sam to owe much more because of the highest marginal rate of 37% applicable to income over $ 523,600 for individual taxpayers and $ 628,300 for married couples filing jointly. Taxes are also usually due.
For Powerball’s $ 640 million jackpot, the one-time option is $ 478.7 million. The 24% withholding would be approximately $ 114.9 million. And again, there will be more.
Think philanthropy
One way to lower your tax bill is to think charity. Basically, the government gives you a tax break if you use private money to do public good.
“It’s not just about what you want to do for yourself and your family, but also philanthropy,” Galinskaya said.
You can donate cash, up to 60% of your adjusted gross income, to a public charity or a fund advised by donors and deduct your tax for the amount in the year you make the donation. You can also set up a private foundation, donate income to it and then eventually determine how to apply it.