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If any of us is so lucky to win the lottery I would hope the first person who would be called is a fee-only financial planner and the second is a tax specialist.
Depending on amount the first might be an attorney to claim the prize anonymously as a trust. Then you can be the dude holding the big check while wearing clown makeup or something.
We've had this conversation a few times around the shop and I asked a good friend of mine who is a financial planner with some VERY wealthy clients what he would do.
Simple answer is to take the lump sum and invest it. He said if you win 100 million and walk away with 35 million he could easily make you back the 65 million lost over 20 yrs even with today's market. In a good market it could be done in 12-15 yrs.
Don't flame me as i'm not a financial guy so I don't know how this would work.. But knowing who some of this guys clients are I tend to believe him.
We've had this conversation a few times around the shop and I asked a good friend of mine who is a financial planner with some VERY wealthy clients what he would do.
Simple answer is to take the lump sum and invest it. He said if you win 100 million and walk away with 35 million he could easily make you back the 65 million lost over 20 yrs even with today's market. In a good market it could be done in 12-15 yrs.
Don't flame me as i'm not a financial guy so I don't know how this would work.. But knowing who some of this guys clients are I tend to believe him.
Consider the source...its a financial planner saying this, someone who makes their money investing other peoples money...of course he want to handle millions of dollars for you!
That being said, without taking taxes into account, he is correct in saying that you are better off with a lump sum. Its the time value of money. You are better taking control of a sum of cash today than having it paid out to you over time. You can start making interest on it today.
But its all about the taxes and you'd have to figure that out. What will they take out in taxes if I get a lump sum today, versus what would I pay in cumulative taxes on payments over 10 years (or what ever time-span). Also you'd have to take into account changes in the tax code over time. All things to consider.
Depending on amount the first might be an attorney to claim the prize anonymously as a trust. Then you can be the dude holding the big check while wearing clown makeup or something.
Good luck with that. Trusts don't buy lottery tickets so no one is going to believe they are cashing them either.
Unfortunately there is little we can tell you about the lucky ticket holder, as the PowerBall winner makes an anonymous claim to their prize. It took until Tuesday 6th June for the winner to step for forward and they chose to claim in a blind trust.
A trustee of The 2010 Blind Trust claimed the PowerBall lottery prize on behalf of the lucky winner and we can reveal that the cash option has been chosen for by the winner, meaning that the lump some payment is estimated to be around $135 million with 31% in federal taxes to be deducted.
The identity of the winner, however, remains a mystery.
Lottery officials announced Aug. 20 that the winning ticket for a $52 million jackpot was sold at a Shaker Heights store. Lawyer Dennis Siciliano claimed the treasure as trustee for the ABC Blind Trust. But Siciliano's client the real winner has not been identified. Siciliano could not be reached for comment.
Mardele Cohen, spokeswoman for the Ohio Lottery Commission, said in a written statement that the trust would receive a lump-sum payment of a little over $30.5 million, before taxes. The after-tax payout will amount to about $21.8 million.
That's the way to go man, save yourself mucho headache.
They do that, and listen to the commercials for them and the others, because many people getting an annuity from a lottery or a personal injury settlement just can't handle the money. Those companies are leeches, plain and simple.
What confuses me is that many settlements are for malpractice or catastrophic injureis and are set up to provide ongoing care for the patient/victim. What are the people spending that money on if not for the care of the afflicted?
The California Lottery and Mega Millions both offer a cash payout option for winners. Is it better to take the payout or sell your winning ticket to someone like JG Wentworth?
Lump sum, take the money and run baby. You never know if some financial hardship will befall a lottery like megamillions or a single state run lottery. This way, you can do things you may not be able to do with an annuity or selling a ticket and getting less then it is worth.
Start a business, buy a house, buy a boat etc. But get that money.
Last edited by stevebri; 05-09-2011 at 10:37 AM..
Reason: good punctuation is our friend
I think if it's 100 Million, you agree to lump sum of half - 50 Million and then the 50 Million is taxed at say 20 % so 12.5 Million in taxes, nets you 38.5 Million.
( Hope I have my math right ! )
You don't have your math right......
100mm is going to have a cash value of about 64.5% (tonight's Powerball is 110mm, cash value advertised is 71mm). Then it will be taxed at the highest federal rate which is 39.6% (not 20%) so 71 X .396 taxes is 42.88mm (add back about 30K due to lower brackets leading up to the 39.6 bracket) so you will keep about 42.91mm in tonight's jackpot.
anyone know the way the lump sum is calculated? that would probably help with the answer.
The default for lottery jackpot payment is a yearly payment over N years (I think 20 years is common).
The lump sum payment calculation is simply the net present value of the stream of yearly payments.
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