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Once again the Mega Millions jackpot has catapulted higher.
The grand prize now stands at a staggering $ 850 million – the third largest in lottery history – after no ticket matched all of the numbers drawn on Friday night. Then there is Powerball: the jackpot is estimated at $ 640 million for the Saturday night drawing.
Of course, the odds of winning either game aren’t in your favor: the chance that a single ticket will match all six numbers is 1 in 302 million for Mega Millions and 1 in 292 million for Powerball.
Even so, it is still worth thinking about how you would deal with such a stroke of luck if you passed the odds.
Jackpot winners are typically given six months to a year to claim their prize, depending on which state it was purchased in. This generally means there is no need to rush to the lottery headquarters.
In other words, the winners should take a deep breath.
Big money means big emotions
Whoever cracks one of the jackpots at the end should be prepared for a roller coaster ride of emotions.
Experts say the extent of their windfall can level off once the initial excitement of winning the jackpot subsides.
“Anyone experiencing newly created wealth … there is a sense of confusion and a sense of being overwhelmed,” said Valerie Galinskaya, executive director and director of the Merrill Center for Family Wealth.
Of course, you don’t have to do it alone.
Given the size of these jackpots, winners should assemble a team of seasoned professionals – including a lawyer, CPA, and financial advisor – to help them tackle the windfall.
“You want to hire the right consultants who can provide not only good advice but also advice tailored to your needs and desires,” said Galinskaya.
Protect your ticket and your identity
You should make a copy of your ticket, keep it in a safe place, i.e. in a safe deposit box or deposit with a bank, and defy the urge to share your messages with everyone in your life.
“Don’t immediately discuss it with anyone other than your immediate and trusted family,” said certified financial planner Jim Shagawat, a New Jersey-based partner advisor at AdvicePeriod of Los Angeles.
Also, if possible, you should protect your identity when you claim the jackpot. While the standard recommendation is to sign the back of the ticket, if, under state law, you set up a trust or limited liability company to claim the windfall, rather than doing it on your own behalf, it can compromise anonymity .
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If your state laws require your name to be publicly known, then it pays to prepare how to respond when others bring up your roundtable, Galinskaya said.
“They say, ‘I’m really grateful and we’re still working on what it means to us,'” she said.
Prepare for the tax bill
For the $ 850 million Mega Millions jackpot, the cash option that most winners choose instead of an annuity is $ 628.2 million.
However, before that gets to you, 24% – or $ 150.8 million – will be withheld for federal taxes. You can also rest assured that you owe much more to Uncle Sam, as the maximum marginal rate of 37% applies to income over $ 523,600 for individual taxpayers and $ 628,300 for married couples filing together. As a rule, state taxes are also due.
Powerball’s $ 640 million jackpot has a flat-rate option of $ 478.7 million. The 24% withholding tax would be approximately $ 114.9 million. And again more would be due.
One way to lower your tax burden is to think in a nonprofit way. Basically, the government gives you a tax break if you use private money for public purposes.
“It’s not just about what you want to do for yourself and your family, it’s also philanthropic,” Galinskaya said.
You can donate up to 60% of your Adjusted Gross Income in cash to a nonprofit or a donor-recommended fund and receive a tax deduction for the amount in the year you donate. They can also set up a private foundation, donate their income, and then choose how to use it over time.