This week's multi-state lotteries Mega Millions and PowerBall are enormous!
No one won all winning numbers in Saturday's Powerball drawing, so the jackpot jumped to $620 million.
And no one won the top prize in Friday night's Mega Millions drawing, so that jackpot surged to a staggering $1.6 billion — the largest jackpot in U.S. lottery history.
Whether it is these large jackpots or another large future jackpot, someone will get really lucky.
Here are some expert tips to avoid making a wrong move with your win right out of the gate.
First, of course check your ticket. Then if you are a winner, keep your ticket safe. Then an unlikely question within this last year has become a major one: do you sign the back of your ticket? You will first want to check the laws of the state where you purchased the ticket to see if your state allows you to claim anonymously. Some states allow it and other states don't. Yet some might allow you claim the prize via a trust as a way to shield your identity from the public. If the ticket bears your name and not the trust's name, it could cause issues if you try to go that route.
Once you realize you are a winner, you will want to acquire a group of trusted professionals to advise you on the entire process of your lottery winnings. This will include an attorney, a tax advisor and a financial advisor.
Typically, Trusts will be set up to ensure that the money is not wasted, is used for the express wishes of the owner, and is most tax efficient ensuring savings on taxes paid.
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Top Things People Would Be Excited About If They Win Big
1. Sharing my prize with others 33.3%
2. Saving/investing the money for the future 21.2%
3. Quitting my job 8.8%
4. Getting out of debt (credit cards, loans, etc.) 8.6%
5. Paying off my house 8.1%
6. Going on an extravagant trip 7.3%
7. Buying a new home 6.9%
8. Paying off my student loans 1.7%
Source: T.D. Ameritrade
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Cash Lump Sum, Annuity Payments and Taxes
When you win the lottery, you get to choose between taking your winnings as a cash lump sum all at once or as an annuity spread out over three decades (30 years).
For Mega Millions, with 1.6 Billion, the immediate cash option is $904 million. For Powerball, its $354.3 million.
Many experts recommend taking the upfront cash lump sum, because if it's managed and invested properly, you could end up with more money over time than if you took payments spread out over several decades.
However, it is important of course to evaluate your own situation.
If you know you have trouble with compulsive spending you may want to go the annuity route.
Before you start planning how to spend or start spending the hundreds of millions you win, you should know a big chunk of it will go to federal and state taxes.
Regardless of whether you go with the annuity or cash option, the federal government will take 24 percent off the amount before it reaches you. That withholding will reduce Mega Millions' cash option by $217 million to $687 million and Powerball's by $85 million owed to $269.3 million. You should also anticipate owing more to the IRS at tax time since your bracket will be way above 24%.
The 24% that Government takes off the top is just a down payment for the taxes you will owe.
On top of the federal withholding, you'll owe state taxes on the money unless you live where lottery wins are untaxed. For states that do take a piece, the rate ranges from a high of 8.82 percent in New York to a low of 2.9 percent in North Dakota, according to lottery site USAMega.com.
Bottom line: Its great if you win but after the Lump sum and taxes the winnings are much less than $1.6 billion – but $687 million is really nice also.