Lump sum or annuity lottery winnings?

[zxcvbob]

I bought a Power Ball ticket tonight.  Wondering the best way to handle the $750MM winnings :D  I know there are some gotchas if you take the annuity and don't do it right (not sure what "right" means), where the federal tax is due on the entire amount in the year you won even tho' you won't receive most of the money for years.  But let's say I don't make that mistake  (I think it has something to do with claiming the prize within 60 days)

I bought the ticket in MN, which has a state income tax.  I don't intend to live here the rest of my life; if I take the annuity option and immediately move to a state like TX or FL with no income tax, will I just owe MN taxes on the first year's annuity payment?  Or will they try to take a big piece of the subsequent payments, claiming the money was earned in MN?

And what about putting the ticket into a revocable trust before I claim it?  The trust lives-on after I die, so I shouldn't have to worry about my heirs owing a big tax bill on money they haven't received yet.

(I'm taking all the joy out of this, aren't I?)

[Andiron]

(I'm taking all the joy out of this, aren't I?)


Yep.  You buy a lottery ticket for the daydreams of all the potential fun stuff you could do,  not how you'd immediately comply with the damned government stealing as much as possible back.  

If we're going to be boring and practical,  screw the tax repercussions,  I'd just be damned sure to claim it anonymously.

[Fly320s]

1.  Hire a competent tax attorney.
2.  Then hire his competition.
3.  Where they agree, you are golden.
4.  Don't worry about the taxes,; you're already way ahead of 99.999% of the people on Earth.
5.  Go have fun. 

Seriously, if you win, you'll probably be dead before you spend it all.  Go snort coke off a hooker's ass from your yacht in Tahiti.

[Ben]

Lump sum. You could be run over by a bus a month after you win.

If you win $100,000,000 and they give you half, blow a million right away, put a million aside, and wisely invest $48mil. It'll eventually grow to what they were gonna parse out to you over 40 years or whatever.

For retirement, the 4% rule is the general guideline for annual spending without depleting your principle over a 30ish year period. If you did the 1% rule with $48mil, you'd be giving yourself an annual salary of $960K while your money grew.

[T.O.M.]

Lump sum.  Time value of money, meaning the money you have in hand is more valuable to you than money you will get in the future.

If your number hits, hire the best law firm near you.  They will have a tax guy.  They will have a civil guy to help plan for most other aspects of a big win.  And they will have criminal guys just in case.

Me, I then hire some of the security guys I work with to do security for me. 

Oh, and one other thing.  I write a check for $1 million to my brother and SIL, to make them go away.  The way they spend money, that should buy me around 5-7 years to disappear.

[MillCreek]

If I was younger, I would take the annuity.  Over age 50, I would take the lump sum.

[Firethorn]

My recommendation is to hire accountants, have them do the financial planning, and take what is best in your situation based on their advice.  Lawyers who can recommend accountants is also good..

I mean, I could work out a half-assed plan, but I'd need to know things like your age and health so I can make a best guess as to how long you'll live, what your goals are(do you want to make a big donation upon your death?), the lump sum payout, the amount and duration of any annuity, etc...



Chris - you might be surprised at just how fast they can spend the money.  I'd count on no more than a year.

[Hawkmoon]

Chris - you might be surprised at just how fast they can spend the money.  I'd count on no more than a year.

I was thinking the same thing ...

[Northwoods]

Lump sum.  Tax rates are unlikely to go down over the next 30 years, considering they're already at the lowest in living memory.  If AOC and her merry band of 'tards get to actual power they'll quickly jack the top rates to 70-95%.  By the time they get to the point of wealth taxes you'll have had plenty of time to ensure you're protected from that.  And with savvy investments you can wind up with more money after 30 years than with the annuity.

[T.O.M.]

Chris - you might be surprised at just how fast they can spend the money.  I'd count on no more than a year.

You're probably right.  But man, can you imagine the stories I'd have to share with you all if it happened? 

[K Frame]

"The way they spend money, that should buy me around 5-7 years to disappear."

NIPPLE TATS FOR EVERYONE!

Given how quickly they plowed through their inheritance, I think a check for $1 million would do nothing but accelerate their reckless spending habits and they would burn through it even faster.

And you'd be the greedy bastard for not giving them even more.

[charby]

Winning ticket was sold in the land of cheese, beer and brats.

[brimic]

I didn't win, but then again I didn't play.
It would be cocaine and hookers until I dropped if I did play and win.

[Declaration Day]

It would be cocaine and hookers until I dropped if I did play and win.

Same.

If someone handed me a million dollars, I would put a new roof on my house, buy a new truck, and invest the rest for retirement.

If someone handed me 750 million dollars, I would be found dead in a Las Vegas penthouse suite surrounded by drugs and hookers. 

I've always been a wild one, and the fact that I earn a modest income has played an essential role in me still being alive.

[Jamisjockey]

Lump sum for sure.  With some intelligent advisors, investments and purchasing even if you only net 1/2 after everything, that becomes generational wealth.

The only expensive "must have" for me would be a "fishing" boat.

[MechAg94]

Lump sum no matter how much it is.  I figure I can hire people to help me figure out what to do with it.  Taxes really aren't a big deal unless it is one of the small payouts.  You might even consider pre-paying some if you are concerned about having enough later.

Some people suck at managing money and I might advise payments or them buying their own annuity if they get it all. 


For smaller amounts, I have it on good authority (from a friend) that the Texas Lottery Commission withholds about 24% for taxes (no income tax or separate lottery tax).  These days, that is pretty close to what most people would owe in federal taxes.  When it comes to the larger amounts, they would probably withhold something similar.  However, I am sure you could hire a good tax attorney and CPA to minimize your tax liability. 

[MechAg94]

Lump sum.  Time value of money, meaning the money you have in hand is more valuable to you than money you will get in the future.

If your number hits, hire the best law firm near you.  They will have a tax guy.  They will have a civil guy to help plan for most other aspects of a big win.  And they will have criminal guys just in case.

Me, I then hire some of the security guys I work with to do security for me. 

Oh, and one other thing.  I write a check for $1 million to my brother and SIL, to make them go away.  The way they spend money, that should buy me around 5-7 years to disappear.

If you can manage it, I woudn't even tell them you have money.  I wouldn't tell anyone.  Yeah, it might be public anyway, but not everyone pays attention to that.

Also, if you really want them to not come back for a while, buy them an annuity so they get a monthly check. 

[zahc]

If I won the lottery, I wouldn't buy a bunch of stuff. I would use it as an excuse to rent EVERYTHING. I would drive fancy vehicles,  but I would LEASE them. I would rent snowmobiles, bass boats, and airplanes, even if it were more expensive than buying. I would live in upscale resorts and apartments, that I would never buy. Owning things is a hassle. To be rich enough to rent everything would be the ultimate.

[Ben]

Owning things is a hassle. To be rich enough to rent everything would be the ultimate.

That's actually a really good plan, and yeah, to do it right, you're talking high tens of millions to 100s of millions. It's really gotta be "I don't give a *expletive deleted*it" money, but then it would be a very stress-free lifestyle.

[MillCreek]

I am reminded of the old saying: if it floats, flies or *expletive deleted*s, it is cheaper to rent.

[Jamisjockey]

Lump sum.  Time value of money, meaning the money you have in hand is more valuable to you than money you will get in the future.

If your number hits, hire the best law firm near you.  They will have a tax guy.  They will have a civil guy to help plan for most other aspects of a big win.  And they will have criminal guys just in case.

Me, I then hire some of the security guys I work with to do security for me. 

Oh, and one other thing.  I write a check for $1 million to my brother and SIL, to make them go away.  The way they spend money, that should buy me around 5-7 years to disappear.

*expletive deleted*ck that. I'd immediately file restraining orders against them lol

[Jamisjockey]

If I won the lottery, I wouldn't buy a bunch of stuff. I would use it as an excuse to rent EVERYTHING. I would drive fancy vehicles,  but I would LEASE them. I would rent snowmobiles, bass boats, and airplanes, even if it were more expensive than buying. I would live in upscale resorts and apartments, that I would never buy. Owning things is a hassle. To be rich enough to rent everything would be the ultimate.

Yes and no.  Things you use infrequently, it's a hassle and you should rent.

Part of how the rich own large boats is they rent them out when they don't use thm.  A good sportfish would charge a premium for big tourneys.  My ideal life would be splitting my free time between cycling and tournament offshore fishing.
Also, it would double as a floating vacation home. 
This beauty is about what I'd be looking at:
https://www.hmy.com/used-yachts-for-sale/Spencer/2010-57-57-Convertible/6509963
That size doesn't need a crew full time.  At most, I'd consider hiring a part time captain and mate for tournament season. 

[MillCreek]

^^^So this may be a stupid question, but why don't I see boats of this configuration up here in the northern Pacific?  I have seen boats like this on the southern East Coast, and down along Southern California and Mexico.  Are they designed for a particular type of weather and sea state, and you don't see those conditions here in Washington?

[Jamisjockey]

^^^So this may be a stupid question, but why don't I see boats of this configuration up here in the northern Pacific?  I have seen boats like this on the southern East Coast, and down along Southern California and Mexico.  Are they designed for a particular type of weather and sea state, and you don't see those conditions here in Washington?

Southern waters tend to be choppier.  Up your way, the swells are larger with less wind driven chop.  Spencer, for example, is a NC company and those boats are really designed for the East coast and Gulf chop with a steeper entry and a wide bow flare to drive whitewash out away from the cockpit.
PNW boats are designed with a blunt nose for plowing through larger seas, and a lower center of gravity for the larger swells.
Neat article on boating in the PNW
https://www.boatus.com/magazine/2017/december/rugged-boats-of-the-pacific-northwest.asp

[BobR]

When I venture over to the wet side to go Tuna fishing I use these guys. They run 29' Defiance Pilothouse boats with 6 customers, Captain and 1 crew.

https://allriversguideservice.com/ourboats.html

bob