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Ohio winner of $196M lottery jackpot claims prize anonymously

Topic closed. 35 replies. Last post 8 years ago by DC81.

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BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
Magnolia, Delaware
United States
Member #18795
July 20, 2005
789 Posts
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Posted: June 28, 2008, 5:22 pm - IP Logged

That probably is smart.

 

But I don't think it was a smart idea to go with the annuity.  You can easily beat the return on treasuries. 

 

Brad

I Agree! Also because this person is getting it as an annuity, they get to pay taxes to the state of Ohio for the life of the annuity! That was NOT a smart move at all!!!!

If it would have been taken as a lump sum payment paid to the blind trust the state of Ohio would only get it's state tax on the money only once! Nothing like supporting the state when you don't have too!!!! (If I was them) I'd fire the estate planner that talked them into that bad deal and then sue them for the bad advice!!!!

Keep dreaming the impossible dream, it just may come true! Thumbs Up

    GamerMom's avatar - tails

    United States
    Member #60535
    April 21, 2008
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    Posted: June 28, 2008, 7:06 pm - IP Logged

    I Agree! Also because this person is getting it as an annuity, they get to pay taxes to the state of Ohio for the life of the annuity! That was NOT a smart move at all!!!!

    If it would have been taken as a lump sum payment paid to the blind trust the state of Ohio would only get it's state tax on the money only once! Nothing like supporting the state when you don't have too!!!! (If I was them) I'd fire the estate planner that talked them into that bad deal and then sue them for the bad advice!!!!

    i"m confused...how do you pay more taxes when you have an annuity??  They will take the same amount of taxes out either way.

     

    I'm sorry but I could live on 5 million a year after taxes, but that's just me; i'm not too greedy...

      Lotto*Love's avatar - lips
      Washington *state*
      United States
      Member #62009
      June 14, 2008
      192 Posts
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      Posted: June 28, 2008, 7:08 pm - IP Logged

      I have a question.and excuse me for being completely stupid on the subject seeing I've never won a jackpot (yet). lol..but what exactly is the benefits of taking an annuity? I guess I can look up on this ?, but I'm too damn lazy and someone here has to know... Do you get more of your winnings if you take the 26 years? Does that knock out the halfing it for lump sum choices? Taxing every year, and paying different as the taxes change, arn't you kinda scre#&(% yourself?  Is it more of a greed thing?Want more, want more.  BUT YES>>>>I DO UNDERSTAND the idea of maybe budgeting yourself and limiting yourself if your put on a like 5 million a year annuity plan.  Dosen't always go picture perfect..I mean remember Bud Post? I'm totally not dissing the man at all, but there was trouble of spending more than he had that year, owing money, and waiting for that yearly $500 thousand to come in to repay people. Plus, you get those agressive companies who try and get you to sell future payouts for a lum sum.  Watch out for those guys! I mean for me, half that baby up and tax it once..I'm positive I can live a full and well taken care of life on my lump sum. Again, I do understand that they choose this for whatever reason went better with their lifestyle, but I'm just wondering how it all works and what is the benefits of taking it yearly....

      Surrender You can run, but you can't hide mighty Jackpot...surrender to me at once!

        Avatar
        Kentucky
        United States
        Member #32652
        February 14, 2006
        7295 Posts
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        Posted: June 28, 2008, 8:18 pm - IP Logged

        I have a question.and excuse me for being completely stupid on the subject seeing I've never won a jackpot (yet). lol..but what exactly is the benefits of taking an annuity? I guess I can look up on this ?, but I'm too damn lazy and someone here has to know... Do you get more of your winnings if you take the 26 years? Does that knock out the halfing it for lump sum choices? Taxing every year, and paying different as the taxes change, arn't you kinda scre#&(% yourself?  Is it more of a greed thing?Want more, want more.  BUT YES>>>>I DO UNDERSTAND the idea of maybe budgeting yourself and limiting yourself if your put on a like 5 million a year annuity plan.  Dosen't always go picture perfect..I mean remember Bud Post? I'm totally not dissing the man at all, but there was trouble of spending more than he had that year, owing money, and waiting for that yearly $500 thousand to come in to repay people. Plus, you get those agressive companies who try and get you to sell future payouts for a lum sum.  Watch out for those guys! I mean for me, half that baby up and tax it once..I'm positive I can live a full and well taken care of life on my lump sum. Again, I do understand that they choose this for whatever reason went better with their lifestyle, but I'm just wondering how it all works and what is the benefits of taking it yearly....

        The next advertised Mega Millions jackpot is $43 million and the cash value is $25.9 million.

        "This (the $25.9 million cash value) represents the sum of the first annuity installment, plus the current market value of government securities required to fund the remaining 25 installments, as of 6/27/2008 at 10:45am"

        Simply put the advertised or estimated jackpot is the amount the winner will eventually get if they take the annuity jackpot and the cash value is the amount it costs to fund the annuity. For taxes it's pay it all now if you take the cash value or pay them from the amount you receive each year. At one time almost all lotto jackpots were paid as annuities and many were for 20 years. Lotteries began offering the cash value as the jackpot amounts grew larger.

        There are pros and cons for taking either on any size jackpot and has been discussed many times on LP.

          BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
          Magnolia, Delaware
          United States
          Member #18795
          July 20, 2005
          789 Posts
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          Posted: June 28, 2008, 8:27 pm - IP Logged

          i"m confused...how do you pay more taxes when you have an annuity??  They will take the same amount of taxes out either way.

           

          I'm sorry but I could live on 5 million a year after taxes, but that's just me; i'm not too greedy...

          I don't understand people and what they don't know about taxes...... You pay what % on your income? lets say 35% the top bracket...OK  Each yr your going to be paying 35% income tax on your annuity plus the state tax for the state of Ohio......  OK  now you take it as a lump sum and pay 35% + the Ohio income tax the ONE TIME!  Do you get it now?  I hope so...... Now lets say you invest wisely.... now you get to pay a 15% capitol gains tax on the investments instead of being taxed at the 35% rate on your annuity payment every yr..... I myself would rather pay 15% capitol gains tax vs 35% income tax rate any day of the week..... How about you?   

          You can also go to the Jackpot Analysis page here in LP and see for yourself the difference and please check it out carefully to see the how much you can save in taxes over time... Please remember it's only an estimate but you can bet it's going to be pretty close for most people.

           

          And yes you bet I'm greedy when it comes to how much I'm going to keep in my pocket! I'd rather have it than to be paying vast amounts in taxes to any State or Federal Government to squander on some stupid program or better yet to give away to some huge corporation in the form of corporate welfare!!!!!!!!!! I think I'm better suited to have the money to spend as I see fit, over any government entity ever could be!

          Keep dreaming the impossible dream, it just may come true! Thumbs Up

            BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
            Magnolia, Delaware
            United States
            Member #18795
            July 20, 2005
            789 Posts
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            Posted: June 28, 2008, 9:00 pm - IP Logged

                                Annuity 43,000,000

            26 payments               1,653,846

            Fed 25% tax                   413,462

            sub total                      1,240,384

            Ohio state tax                 113,288

            Your net                       1,127,096 for now until tax time...lol

            Now remember you going to still owe another 10% on the original 1,653,846 to the IRS at the end of the year!

            Now if you take what the IRS is going to get each year from your annuity check and multiply that by 26 your going to pay 10,750,012 in taxes on that annuity right off the top.... plus your still on the hook for another 10% and that's only if the government doesn't raise taxes in the mean time over those 26 years....... Now we still have yet to cover the state taxes that Ohio is owed for the next 26 years.... 113,288 x 26 = 2,945,488.

             

            Now lets take a look at the LUMP SUM Totals.                    26,000,000

                                                                                   Fed 25%         6,500,000

                                                                                   sub total       19,500,000

                                                                                    Ohio               1,560,000

                                                                        Your Net                   17,940,000 

            still another 10% owed to IRS at the end of the year on the total of 26,000,000 (2,600,000).

            Math is so simple and it explains it all in the numbers and that's the cold hard facts of it all! You have got to love it........LOL

            Keep dreaming the impossible dream, it just may come true! Thumbs Up

              GamerMom's avatar - tails

              United States
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              April 21, 2008
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              Posted: June 28, 2008, 9:09 pm - IP Logged

              Your net                       1,127,096 for now until tax time...lol

              but if you multiply that x 26=$29,304,496

              your net from the lump is 17,940,000.   So it does to pay to wait.  If you invest the (lump sum) money, you will be still paying taxes on the interest, no??? 

                Avatar
                Kentucky
                United States
                Member #32652
                February 14, 2006
                7295 Posts
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                Posted: June 28, 2008, 9:23 pm - IP Logged

                i"m confused...how do you pay more taxes when you have an annuity??  They will take the same amount of taxes out either way.

                 

                I'm sorry but I could live on 5 million a year after taxes, but that's just me; i'm not too greedy...

                Ohio tax is 6% and that amount will be deducted from each of the 26 payments because that will always be Ohio income no matter where they live. Since the amount of the annuity is higher than the cash value, they will pay more in Ohio taxes on the annuity.

                The article mentioned city tax and one city that did have an income tax wanted to collect taxes from a jackpot winner because the ticket was sold in their city even thought the winner didn't live there. The courts ruled the winnings or income came from the state and not the city where they bought the ticket so they didn't have to pay city taxes.

                "I'm sorry but I could live on 5 million a year after taxes, but that's just me; i'm not too greedy..."

                It was suggested by a LP member that the winner should be required to start a small business but I believe most players will say they want the choice of how they collect and spend their winnings. It's not about being greedy because they offer the cash value too; it's a personal choice.

                  Avatar

                  United States
                  Member #972
                  December 30, 2002
                  465 Posts
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                  Posted: June 29, 2008, 12:05 am - IP Logged

                  Come forward you wuss. How do we know it was a legitimate win and not a lottery scam? Claiming it this way makes me determined to find out who it is, otherwise I would have forgotten the name by tomorrow. Claiming anonymously is not so great after all is it?

                  I know people are curious and yes seeing who won is part of the fun, but I don't think it does you any good to get your face and name out there for public consumption. It is not going to give you a dollar more, not everyone is interested in the fame or notoriety, and going from a few thousand dollars in the bank to over $100 million is a big adjustment that would be easier made without having to fend out beggars, sob stories, investment advice etc.

                  I also think that in addition to not wanting to be famous, some people don't want to be professional investors. They don't want to use the lump sum to attempt to make more than the annuity.  When you have this much money, you don't need to invest to make any more, unless you find it fun to attempt to do so. So let the state invest for you in the annuity. Some people on here think unless you aim for making the most money and least taxes possible then you are foolish. But I don't think so. Let someone handle my taxes and then park it in a bank account I can easily get to, and let me have fun living life the way I want to where I want to.

                    BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                    Magnolia, Delaware
                    United States
                    Member #18795
                    July 20, 2005
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                    Posted: June 29, 2008, 12:51 am - IP Logged

                    Your net                       1,127,096 for now until tax time...lol

                    but if you multiply that x 26=$29,304,496

                    your net from the lump is 17,940,000.   So it does to pay to wait.  If you invest the (lump sum) money, you will be still paying taxes on the interest, no??? 

                    OMG, you have to be kidding... right? I guess it does take all kinds..... Capitol Gains Tax is just that... it's a tax on any gains you made on any investment! And it's better to be paying a 15% capitol gains tax vs a 35% income tax! Capitol gains tax is the tax you pay on the return you earn on your investment (like interest or gained value on a stock...etc).

                    But like I said before.... go ahead and wait and who knows what your tax rate will be 5,6, 10 years down the road into collecting those annuity checks....  Most likely taxes will be higher (they rarely go down) and the dollar will be even weaker against other currency than it is today... so go ahead and wait for the long drawn out payday...

                    Keep dreaming the impossible dream, it just may come true! Thumbs Up

                      Avatar
                      NY
                      United States
                      Member #23835
                      October 16, 2005
                      3471 Posts
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                      Posted: June 29, 2008, 3:15 am - IP Logged

                      I don't understand people and what they don't know about taxes...... You pay what % on your income? lets say 35% the top bracket...OK  Each yr your going to be paying 35% income tax on your annuity plus the state tax for the state of Ohio......  OK  now you take it as a lump sum and pay 35% + the Ohio income tax the ONE TIME!  Do you get it now?  I hope so...... Now lets say you invest wisely.... now you get to pay a 15% capitol gains tax on the investments instead of being taxed at the 35% rate on your annuity payment every yr..... I myself would rather pay 15% capitol gains tax vs 35% income tax rate any day of the week..... How about you?   

                      You can also go to the Jackpot Analysis page here in LP and see for yourself the difference and please check it out carefully to see the how much you can save in taxes over time... Please remember it's only an estimate but you can bet it's going to be pretty close for most people.

                       

                      And yes you bet I'm greedy when it comes to how much I'm going to keep in my pocket! I'd rather have it than to be paying vast amounts in taxes to any State or Federal Government to squander on some stupid program or better yet to give away to some huge corporation in the form of corporate welfare!!!!!!!!!! I think I'm better suited to have the money to spend as I see fit, over any government entity ever could be!

                      It sounds like you're one of the people who doesn't understand the tax implications.

                      The income comes from the state of Ohio, and Ohio gets to collect income tax on every dime of it (other than whatever exemptions you get).  You can take it all now and pay all of the taxes now, or you can collect some each year and pay some of the total tax each year. Either way, the state gets to collect tax on all of it, but they only collect that tax once. Regardless of whether you take the lump sum or the annuity the income you earn from sources other than the lottery prize will be taxed based on your residence and the type of income.

                      If you take the lump sum you'll have one year's worth of deductions. The first 350k (give or take, assuming married filing jointly) will be taxed at somewhat lower rates, and the rest will all be taxed at the highest rate. If you take annuity payments, you'll have deductions every year, and every year  you'll be taxed at somewhat lower rates on the first 350k. For PB's 30 year payout that's as much as 10.5 million that will be taxed at lower rates. Sure, it's possible that tax rates will go up, but they may also go down. If you'd won a jackpot and taken a lump sum in 1980 you'd have paid 70% federal tax on the vast majority of it, and you'd probably have felt pretty stupid when rates dropped to "only" 50% just 2 years later.

                      Another advantage of the annuity is that you'll have more money invested on your behalf. By taking the annuity all of the money that isn't yet paid as taxes will be invested and earning interest. If the cash value is $10 million the lottery will invest the entire $10 million, while Joe Taxpayer  can only invest $6.5 million (after federal taxes, and assuming there is no loss to state taxes).  To earn the same income with your post-tax investment you'd need a rate that is about 50% higher than the rates the lottery gets. Sure, you can go for capital gains, but you won't be a typical investor with a modest portfolio.  Your income after a lottery win will almost certainly mean you'll be paying the alternative minimum tax rate of 28% on most of your income.

                        Avatar
                        NY
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                        October 16, 2005
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                        Posted: June 29, 2008, 3:22 am - IP Logged

                        Your net                       1,127,096 for now until tax time...lol

                        but if you multiply that x 26=$29,304,496

                        your net from the lump is 17,940,000.   So it does to pay to wait.  If you invest the (lump sum) money, you will be still paying taxes on the interest, no??? 

                        The top bracket for federal taxes is currently 35%. Add 6% for Ohio, and that's a total of 41%. Annual deductions and paying lower rates on some of the income will favor the annuity, but let's keep it simple and assume that's the rate for every dime of the income. That leaves 59% after taxes. On the $26 million lump sum you'd have $15.34 million now. With the annuity you'd collect $25.37 million. That sound slike 65% more money, but it would take 25 years to get it all. Having to wait to collect the full annuity value means that it isn't really 65% more than the lump sum.

                        What the real difference is depends on what happens in the future. Nobody has a crystal ball that will tell them for sure what wil happen, so all you can do is get the best information available and take your chances. Increasing tax and interest rates make the lump sum more appealing, while lower  tax and interest rates favor the annuity. The best thing you can do is get informed opinions from people who reallyunderstand the relevant issues, make your best guess about the  future, and consider your own personal goals, plans and temperment. Almost everybody takes the cash value, but there's nothing intrinsically wrong with the annuity. For some people it's definitely the better choice. The only thing I would say should be written in stone is that people who take the annuity because they have concerns about their ability to control their spending should never change their mind and sell the annuity. Winning the lottery means your budget is a lot bigger, but you still have to live within that budget.

                          LottoAce's avatar - WWI Flying_Ace.gif
                          N.C.
                          United States
                          Member #56005
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                          Posted: June 29, 2008, 12:46 pm - IP Logged

                          Smart to keep his name and face out of the front page.

                          Smart on taking it over the years?...depends.

                          Although he/she would make more money over a 25 year period by taking the lump sum and investing wisely, there are other things to consider...

                          one thing for example.

                          for someone who isn't comfortable with investing, a smaller steady income would allow for many finacial mistakes over the years without damaging ones net worth. (sometimes its better to leave some of your toys safely in the toybox...otherwise between sqaubling siblings and the family dog you may end up with all your toys completely destroyed)

                          remember handling 196 million is a huge responsibility. he/she could end up like that dork in West Va. who won 365 million, and 6 years later was finacially busted.

                          a friend of mine once said, "money is like dope". you do a little at a time your fine. build up a tolerance,

                          do to much, to soon and you OD!

                          you don't learn to handle large amounts of money overnight, it takes time, hard work, and education.

                          I've worked hard enough in my life, and time is something I would not want to waste anywhere but on a secluded beach sipping a cool drink.

                          7 plus million a year, I don't need any more than that...that would be more money than I would know what to do with!

                          But I would live to give it a try!!

                          *just another point of view*

                          "know your limitations, but excede your expectations"

                            Littleoldlady's avatar - basket
                            Clarksville
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                            Member #487
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                            Posted: June 29, 2008, 7:19 pm - IP Logged

                            I think the person got very sound advice.  The way the markets are today, you may invest heavily and lose heavily.  Also, the total economic picture is changing.  In 20 years, gas may be 100 dollars per gallon and a loaf of bread may be $50.00.  That person wanted to ensure that they and their loved ones would survive.  The way I look at taxes is like this:  if you aren't paying any, you aren't making any money.  It doesn't matter who you pay, Uncle Sam or State or both..also, that person will get to deduct their state taxes from their federal every year  so all is not lost. 

                            Claiming the jackpot anonymously was also very smart.  Trust me..people and businesses will hound you to death.  I had won 25 grand once and you wouldn't believe the people (most of whom I didn't even know) asking for favors and money like I was rich or something.

                            If you know your number is going to hit, have patience and then KILL IT!

                            You never know when you will get another hit.

                              mken32's avatar - Lottery-062.jpg
                              I dont know where
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                              Posted: June 29, 2008, 8:09 pm - IP Logged

                              I Agree! Claiming the jackpot anonymously was also very smart. and The way the markets are today, you may invest heavily and lose heavily.  Also, the total economic picture is changing.

                              Party Like a RockStar