Quantcast
What to do if you win that $1B Mega Millions Jackpot – Metro US

What to do if you win that $1B Mega Millions Jackpot

mega millions | what to do when win the lottery
Reuters

The Mega Millions jackpot has climbed to $1 billion — a record for Mega Millions and the second-largest lottery jackpot in United States history — and that means thousands of Americans will be anxiously tuning in to the Friday evening drawing, visions of giant checks dancing in their heads.

Let’s say you’re lucky and you win, beating the 1 in 302,575,350 odds and becoming an instant multi-millionaire. What should you do next?

One thing not to do is get carried away with immediately planning a shopping spree, said Rich Ramassini, a certified financial planner and director of Strategy and Sales Performance at PNC Investments in Pittsburgh.

“It’s fun to actually dream about winning the lottery and fantasize about immediately buying an airplane or private island while boasting about it on Facebook,” he said. “The reality is that you if you find yourself holding the winning ticket, you should take a deep breath and slow down.”

Even though you may want to brag about your new millionaire status, Ramassini advises that you limit the number of people you tell about your immense winnings.

“The truth is that this incredible amount of money has the potential to ruin or change relationships,” he said. “You also could be hounded by so-called friends and relatives who suddenly come out of the woodwork.”

You’ll have to go public eventually (there are only six states where lottery winners can remain completely anonymous: Delaware, Kansas, Maryland, North Dakota, Ohio and South Carolina), but you should still take some steps to protect your privacy. Boasting about your win online could be a way to put a target on your back, Ramassini said, for solicitors and even fraudsters.

mega millions jackpot

Most lottery winners have never had to manage such a large sum before their win. With the Mega Millions up to $1 billion as of Friday morning, with a cash option of $565 million, you’ll need financial planning and professional guidance. Professionals can also help you decide whether to take the lump sum or get your Mega Millions in annual installments, which depends on your personal financial and cash flow situation.

“It’s an immense amount of money, but if you aren’t disciplined, you can easily blow through it,” said Ramassini. A financial planner will help you set goals for spending, saving, gifting and investing, so the Mega Millions win isn’t just a flash in the pan.

You should also plan for an emergency fund, debt payoff, retirement and daily expenses.  Find an attorney to update your will and to create an estate plan or trust account, as well, and tap an accountant for help handling all the taxes on those Mega Millions. 

Mega Millions Jackpot and taxes

The Lottery Commission will automatically withhold 24 percent of your winnings for federal taxes, but that’s not the end of what you’ll owe.

Winning the Mega Millions jackpot will bump you into a higher tax bracket at 37 percent, and since officials only took out 24 percent initially, that means you’ll still owe money to the IRS when you do your taxes. Melissa Labant, director of tax policy at the American Institute of Certified Public Accountants, said this surprises a lot of people.

“They think, ‘Oh I’m good, they took out taxes when they wrote me the check, everything else is mine to keep,’ and the answer is no, they took out the minimum amount required under the law,” she said. “However, you’re likely going to have to pay that difference.”

You’ll also have to think about state income tax. If you take the annual Mega Millions jackpot payments, this might come into play if you want to move. Only seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas Washington and Wyoming. (New Hampshire and Tennessee don’t have a state income tax, but do tax interest and dividends.)

mega millions lottery

“If I were to win a substantial amount of money I would think that would change my entire life, and at that point folks might think about possibly relocating,” Labant said. “Say you always wanted to live in Florida, so you buy second house or move to Florida, I’d strongly encourage you talk to [certified public accountant], because if you had decided to get installments and you become a Florida residents in future years, then possibly some of those winnings may not be subject to state income tax.”

Finally, if you’re a generous Mega Millions lottery winner and you want to share some of your cash, you’ll have to think about gift tax. For 2018, the federal gift tax applies to any amount over $15,000.

“Which is relatively small when you win a [$1 billion] jackpot,” Labant admitted. But if you’re writing a lot of checks to friends and family, it’s something to think about, and it also means you now have a gift tax return filing requirement.

Basically, there’s a lot of new rules you’ll have to navigate, and professionals can help. And after you talk to them, you won’t have to deprive yourself, Ramassini said.

“Mostly importantly, enjoy your wealth,” he said, “so splurge a bit – within reason – on a new car or vacation.”

Next Mega Millions Drawing

The next Mega Millions jackpot drawing is scheduled for 11 p.m. ET on Friday, Oct. 19.