They don't have as much time as it seems
By Kate Northrop
A crucial deadline for claiming the record-breaking $1.337 billion Mega Millions jackpot drawn in July is approaching for the single Illinois-based lottery winner.
The lone Illinois winner of the unimaginable $1.337 billion Mega Millions jackpot is only weeks away from a major deadline that could have a huge impact on the amount of money they get to walk away with.
"For a prize of this magnitude, it's not unusual for the winner to take a while to claim," Illinois Lottery Director Harold Mays said in early August. "I'm sure they're going through a range of emotions."
If the winner wishes to claim the prize as a lump sum, however, they better get a move on. Mega Millions winners in Illinois get one year from the draw date to claim their prize, but only as an annuity. The prize can only be claimed as a lump sum within 60 days.
The final day to claim the jackpot and take home the one-time lump sum of is September 27, 2022. If no one steps forward by then, the prize will default to the annuity option.
"They have a choice that will be made for them if they don't make it," Susan Bradley, founder of the Sudden Money Institute in Palm Beach Gardens, Florida, told CNBC.
According to USA Mega, the cash option is worth $780.5 million, with the total take-home in Illinois coming to $453.12 million after federal and state taxes are deducted.
There are advantages to claiming the prize as either a lump sum or annuity depending on the winner's situation and preferences. The cash option is taxed more heavily than if you were to receive the full annuity prize, however you receive a massive amount of money right away versus annual payments over 29 years.
"Some people say take the lump sum because you manage it instead of the state," Bradley continued. "But that's loaded with all sorts of responsibilities that people can't see coming."
Those who feel they could potentially be overwhelmed by the sudden influx of unfathomable wealth might opt for the annuity option to ease the burden of planning their spending, investing, philanthropy, and gifting goals.
Bradley recommends that, even if a lottery winner chooses the annuity option, there should still be a plan in place for when the 29 years of payments are up.
"They should have a replacement fund," she advised. "Assume 50% of the annual payment is yours after taxes. Then split it in half again and put half in your replacement fund."
Here is what we would do if we won that much money.
The winning ticket for the $1.337 billion Mega Millions jackpot was sold at Speedway #4250, located at 885 E. Touhy Ave. in Des Plaines.
One facet of winning a big jackpot that this winner does not have to worry about is revealing their identity. It's likely that we'll never know the winner's name, because Illinois allows lottery winners to remain anonymous for prizes of $250,000 or more.
"We will work closely with the winner to respect any wishes for privacy and support them in any way we can to provide a positive winning experience," Mays said in a press release last month.
Wonder how many states require players to choose annual payments vs annuity? Time this was shelved and let them decide when claiming the prize.
Maybe 15 years ago or so when you purchased a ticket for the big boys in KY you had to decide right then and there which route you wanted. Glad they got rid of that...maybe the advent of self service machines years later dictated this needed to go?
In Texas we have to choose when buying the ticket if using a playslip. If a retailer prints a ticket from the computer (a QP) it automatically chooses the cash value prize unless the annuity is requested.
Interesting options this winner(s) has:
1. Complete anonymity
2. Cash Lump Sum Always the best (imho)
3. Annuity https://www.usamega.com/mega-millions/jackpot/annuity/il/2022/7/29
Starting with the 1st payment of $11.71 Million AFTER state and fed taxes are paid, then going up. Payment # 15 would be $23.16 Million take home (provided taxes stayed at the same rate). The final take home payment of $48.12 Million ( If taxes stay the same in 29 years).
Lots to ponder for this/these winner(s)...... Congratulations on the newly soon-to-be acquired wealth and best of luck with your decisions.
I would always prefer the lump sum but I definitely would not trust a state like Illinois for the annual payments. It wasn't that long ago that they were giving you an IOU for any winnings over $600. And the state government there has been corrupt for a long, long time. They even have a saying there that all their Governors serve two terms, one in office and one in prison.
Why are the taxes higher when taking the lump sum?
Wouldn't the annual amount put a winner in the highest tax bracket every year?
Seems like that ticket is lost. If they hit for that big amount, what are you waiting for? Very Unfortunate
Counting Down to Feast or Famine!
Have you forgotten that CA couple that waited until the very end to claim their share of a multi-billion $ prize?
This might be the same case too. July 2023 is still a way off...give it time.
a closed loved one of mine,
in Killeen, Tx., was saying something about that. just wanted to say that today.
This is a very sad thing, if the woman does not claim it. (or man) because I'm one who is in her late 30s, so basically tipping on middle age." I would want LUMP SUM if my child age, she 20, and early 20s both girls. or, if i was middle age already mid 40s fifties, and up i would still want LUMP SUM. I am one who do not trust any gov't with my
'annuity" pay etc., nope. would want it, only in 1 big juicy nice LUMP SUM.
Claim the money now! Lump sum ,, buy an annuity. Put the money to work for you. The money isn't doing any good if it's not claimed.
Have we ever seen a winner take the annuity vs a lump sum for a major win of $200 million plus? I cannot recall any. I am wondering if the ticket was lost, not checked, etc.
Kate......I have seen a lot of videos offering advice on what to do if you suddenly become a multi-millionaire, but I must say yours was the best. You kept things simple and explained the reasons behind your advice, instead of just giving advice. Hard to believe this is the first time I've watched that video. Thanks.
So what happens if it isn't claimed at all!?
If a jackpot prize goes unclaimed, each participating state in the Mega Millions game will get back all the money it contributed.
The Illinois Lottery allows winners to remain anonymous so let's hope this jackpot winner is having a problem deciding "cash or payments" and the ticket is not lost and goes unclaimed.
Just occurred to me maybe the winner hired Crawford Shaw to validate the ticket and Shaw will wait until the 11th hour before heading to lottery headquarters.
All kidding aside, the winner might not even know their claiming options have a 60 day deadline. We'll know in a couple of weeks.
The only reason to take the lump sum is that you're too close to the jumpin' off point. I mean, really- why take 41.5% right off the top and then pay another 42% in state and federal taxes on the remainder? That would seem foolish to me.
Yes, Vinh Nguyen won a 228 million Powerball jackpot in California in 2014 and took the annuity option.
No, most people would take the lump sum. No one really knows what is going on inside their state government which is holding one's annunity. You look up one day and the money just might be gone. Most of us don't care about paying the taxes because at the end of the day, it is STILL more more that we are getting then we have ever had before. Take the lump sum...
Hopefully the winner is making arrangements to move far away from that state before the no cash bail required /no holding in prison prior to trial law begins in 2023. Run before "the purge" begins.
I'm secretly hoping it's a lost ticket for some reason.
Waiting for a second chance drawing?
Someone said each state lottery gets back what ever they contributed to the jackpot IF the ticket goes unclaimed. How it's distributed will probably be decided by each lottery.
"In Texas we have to choose when buying the ticket if using a playslip. "
At one time IRS rules required the selection to be made within 60 days, but IIRC failing to decide got you the cash so that it was all taxable th first year. Those rules have changed but apparently some states haven't caught up yet.
"Why are the taxes higher when taking the lump sum? "
Because not all of your annual income is taxed in the highest bracket. Just to make it really simple, the federal tax on the first 540k of annual taxable income (if you're single) is about 31% and on everything over that it's 37%. If you take the one-time lump sum you'll pay 37% on all of the taxable jackpot except that first 540k. If you take annual payments you'll pay 31% on the first 540k of taxable income each year. The end result is that with the 30 year annuity you can pay 31% on $16.2 million instead of just 540k. That's a savings of 940k on federal taxes.
Of course there are a lot of assumptions baked into that. One is that tax brackets won't change at all during that 30 year period. Another one is that you'll spend each annual payment and not have any income besides the annual payments. That's workable if you plan to be dead within 30 years, but if you decide to save any of the money for some reason you're likely to have other income that pushes the entire annual payment into the highest bracket for most of the 30 years.
"If they hit for that big amount, what are you waiting for? "
There's a lot to take care of before claiming the prize if you're smart enough to do it. That can take a while, especially if you don't want it to be full-time job. If you're the next David Lee Edwards maybe you're still poor and unable to spend much until the money hits your bank account, but a lot of people are effectively rich as soon as the ticket becomes a winner so there's no big rush to get the cash.
Why do you consider the "Cash Payment" is the best way To Go?
Every Time I hear of a lottery winner taking the cash prize, I really believe the person has not given the matter sufficient thought.
You want to use the system To Your Advantage and not the taxing authorities.
As far as taking the annuity is concerned a lot depends upon the age of the winner.
At my age (I'm retired) there's no way I'd take the annuity. My son may feel differently. G5
When the lottery first started, we were told by our branch manager to read all the rules and regulations and all the details so we could answer any questions our bank customers might have. Of course we should always cross sell the other departments of our bank especially the services of The Trust Department. You know, should you die before collecting all funds of the jackpots, They Continue to send the checks or the direct deposits until the amount of the jackpot has been paid.
Therefore, thinking of those family members or organizations left behind after you death, establishing a trust to guarantee future funds to start or continue in their direction is a very good plan for the future. One idea which would allow the trust to grow might be to not let any one have more then their current annual income is at the present time. These funds could be paid out weekly, monthly, quarterly, semiannually or annually Of course you should also have a Will drawn up. Should you NOT have a will, estates are then divided according to state law. In that case your funds might go to family members you may have not wanted to support. A lot of planning ahead should be considered.
Point well taken. 20 or so years ago I'd have taken the annuity, but these days NO.
For one, won't live long enough to see 29 years of payments PLUS the big downside to me is getting hit with a huge tax burden all those years. Pay up front and be done with it.
I dont want someone else to control my allowance for 29 years,getting 5% increase each year ..... Just curious if anyone knows what are the federal and state income taxes going to be in 4 years from now ? How about 12 yrs, 17 yrs, 22 yrs, 26 yrs ?? I know that I will never reside in another state that has a state income tax. Can you imagine giving the state of Illinois the 4.95% income every single year for the next 29 years ? Does anyone truly and realistically believe as greedy and STUPID as our governments have become with our money, that income tax will not go up?
https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx
They all refuse to stay on a budget. The "we have to provide a fail safe net mentality for everyone" is getting a bit ridiculous. $30 Trillion and climbing(no matter who's in office) for the feds. I would rather be able to give MY money in bunches to help family/friends/charities right now, today, as opposed to trickling the money out over 29 years.
That's okay, the mandatory 37%, today, is enough for me. I want to have my money working the best it possibly can for my future. Having mandatory state income tax for 29 more years, doesn't seem to be like the best option for this participant.... But I have been wrong in the past and probably will be again, in the future. Just my 2 pennies on the subject
I invite you to take a look at this site: https://www.usamega.com/
Then look at the Jackpot Analysis under both games. Take a good look at the first line regarding the Federal Tax over time for the annuity payments and the sudden extremely large Cash Jackpot Prize.
Go down and find your state on the list and like to it notice the SMALLER FEDERAL TAX payments for fed and state taxes.
Are you aware that there are about seven states where there are no State Income Taxes and even a few that do not have a State inheritance Tax. Florida is one that has neither.
Use the tax systems to your advantage. Do some homework for your advantage.
My feelings about lump sum or annuity: if you're under 40, you should take the annuity and if you're over 40 take the lump sum.
If you take the annuity and die before the last payment, your estate would be responsible for the inheritance tax on the full amount remaining.
That's why with such a large amount in money you should have a Trust Department in a bank take care of all the paperwork.
You do not need an elaborate will if you have a trust. A trust typically includes a short attached will with a pour over provision to catch anything that might not have been originally listed in your trust...such as a second home or additional assets.
And have your attorney prepare the will and trust. Keep those financial and trust relationships separated. A bank does not need to know all the beneficiaries of your investment trust and who gets what percentage wise.
A trust can be a beneficiary for any type of financial investments and it is common in investment firms to see investments for entities like "the Smith Family Trust."
Agree with everything you wrote. As for me personally, the bank I'd use would probably be a private bank. My thinking is that a private bank would be a better fit for me than a commercial bank. But there isn't anything wrong with using the services of a commercial bank. G5
Single owner bank accounts are only insured for $250.000 so people with millions spread their money in several banks. Cash management accounts with reputable brokers is another option.
We read people saying they would put together a "team" of lawyers and financial advisers before going to lottery headquarters. The thing is most lottery players don't have a lawyer on retainer or have millions invested in a well known brokerage firm. Over night, they became multimillionaires with very little knowledge what to do with hundred thousands let alone millions.
Look what happened to the lottery winners trusting the "lottery lawyer"
"The thing is most lottery players don't have a lawyer on retainer ...Look what happened to the lottery winners trusting the "lottery lawyer"
That's one of the many reasons that a whopping 7 weeks passing since winning the last MM jackpot isn't anywhere near long enough to think the ticket is likely to be lost. The person who claimed the record MM jackpot took 5 months to find the right lawyer and get things in order and look how that worked out.
Of course it seems to have been the management of the money after it was claimed that was a problem rather than actually claiming the prize. No matter who you pick I think a good rule of thumb would be to not give actual control of the money to anyone unless you're okay with them sharing in the wealth. If you abandon all of the wealth management work you may find out you've abandoned the wealth itself.
Greetings:
When the Lottery first started in New York we were told that the New York State Lottery officials were requited to put funds into US Treasury Bills, Notes and Bonds. There fore thee would be guaranteed by our Uncle Sam at later dates. Wasn't Illinois required to do the same?
Estates do not have to be settled all at once. An estate can stay open for years and carry on income producing businesses. They can also advise potential Trust Granters of ways trusts can give to nonprofits and doing so may give the trust a good refund when the Trusts Taxes (1041) s and state forms are filed.