Someone at your New Year’s Eve party could be a newly minted megamillionaire, and you might not even realise it if the winner is astute.
Experts say that as exciting as it would be to win Friday’s Mega Millions jackpot, which is now up to $640 million after there was no winner on Tuesday night, the winner should keep quiet.
After all, claiming that much money will almost certainly attract taxes, swindlers, and friends and family members, prompting our first and most important piece of financial advice.
“Don’t brag about your victory,” said Rob Burnette, a financial and investment adviser at Outlook Financial Center in Troy, Ohio. “If you happen to win the lottery, keep it quiet. Make a plan and get organised. If possible, consider remaining anonymous.”
What is the size of the jackpot, when is the drawing, and what are my chances of winning?
The $640 million prize is awarded to winners who choose the annuity option, which is paid out annually over a 30-year period. The majority of winners choose the cash option, which is $328.3 million for Friday night’s drawing.
The odds of matching all six numbers were roughly one in 303 million. Mega Millions tickets, which cost $2 each, are available in 45 states, as well as the District of Columbia and the United States Virgin Islands.
Why should you not inform everyone?
“Some of those scammers falsely identified themselves as being associated with Mega Millions,” Mega Millions stated. “All of these scams have one thing in common: they try to trick you into sending them money or personal information by claiming you won a large lottery prize.”
Mega Millions stated that no representative would ever call, text, or email anyone about winning a prize.
Remember that “no real lottery tells winners to put up their own money in order to collect a prize they have already won,” according to the statement.
Steve Azoury, the owner of Azoury Financial in Troy, Michigan, said he has advised many lottery winners, including one who won $181 million “”Who said, ‘I don’t want to know you if I didn’t know you before.'”
What can or should you do if you can’t tell everyone you won?
“Get a tax attorney and a tax accountant right away, and then a financial adviser,” Azoury advised. “They’ll collaborate to devise a strategy.”
The plan will specify which payout option to select:
An annuity option provides an initial annual payment followed by 29 additional annual payments. Each payment is 5% larger than the one before it.
The cash option is a one-time, lump-sum payment equal to the Mega Millions jackpot prize pool in cash.
The plan should also include a “fall guy,” according to Azoury. “That’s the person or adviser who prevents you from making loans to anyone, who tells people that all the money is locked up in investments and isn’t available. We have no resources to assist you and are uninterested in your project.”
Should you take a lump sum or monthly payments?
That decision is based on your goals, age, and whether the lottery rules allow beneficiaries to continue receiving payments or if you’d likely waste a lump sum.
Mark Steber, chief tax officer at Jackson Hewitt, suggests the following:
The size of the lottery winning: This can be used to calculate the taxes you may owe and the financial security you can derive from it. If the amount is small, a lump sum may simply be more convenient.
Earnings now and in the future: Consider your earning potential and tax rates over your lifetime.
How much money do you take home?
That is dependent on how you choose to take your money and the complexities of state laws.
If you win the Mega Millions lottery, you will almost certainly be placed in the highest federal tax bracket. Your state of residence and where you purchased the winning ticket can have a significant impact on what you pay in state taxes.
For example, if you live in California and buy your lottery ticket there, you will pay the 37% federal tax rate but will be in luck because California does not tax lottery winnings, according to Steber.
However, New York has the highest tax rate on lottery winnings.
However, if you are a California resident on vacation in Rhode Island and decide to purchase a lottery ticket there, you must include your lottery winnings on your federal and California tax returns, as well as file a nonresident Rhode Island tax return for your jackpot. He recommends claiming a tax credit for Rhode Island taxes on your California return to avoid being taxed twice on the same income in two states.
“This is where a tax professional can really help,” Steber said. “State taxes can be very complicated.”
When do you get your money if you win the Mega Millions?”
It shouldn’t take long to claim the prize, according to Azoury. “Perhaps a couple of weeks,” he speculated.
Remember that most people will not claim their winnings right away because they will need time to plan their strategy. Claim periods differ by jurisdiction, so individuals should contact the lottery in the state where the ticket was purchased to determine the applicable claim period for that ticket.
According to the lottery, Mega Millions claim periods range from 90 days to one year from the draw date, but they vary by jurisdiction. Winning ticket holders should contact the lottery in the state where the ticket was purchased to determine the applicable claim period.