So, here's a few quick calculations which should (hopefully) prove the value of cash value over annuity:
The California State Lottery's SuperLotto Plus minimum jackpot is 7 million, and these numbers are using that figure (and the lump sum figure provided on the lottery web page here) as a basis. I will, for the sake or argument, assume that the state lottery program faithfully pays out on schedule for the duration of the annuity and that the bonds actually earn the estimated interest over that time.
Annual Payments Total after 26 years = $7,000,000
After 35% taxes on all payments: $4,550,000
(and yes, you'll be in the highest tax bracket with even the smallest annual payment made).
Estimated Lump Sum: $3,640,000
After 35% Taxes: 2,366,000
After 26 years of 5% compounded annual interest: $8,412,721
After paying 35% tax on interest: $6,296,369
And, just to be fair, here's what you'd have if you immediately invested each of the 26 annual payments into a 5% interest account (assuming 35% taxes on each payment and the interest earned): $6,217,577
So... take the annuity and put every dime in a 5% account and end up with about 6.217M, take the cash value and stick it in a 5% account and get 6.296M... not a huge difference. However, keep in mind that both those figures are assuming you're still working for all 26 years and taking no money out of your winnings account (how many people wanna do that, honestly). If you start taking money out each year to live on, the cash value becomes more and more attractive, since you have so much more money earning interest to begin with.
I don't know about you, but I'm pretty sure I could find a finiancial advisor that would earn me more than 5% annually, starting with over $2.3M in capital, and get me enough additional income to live quite happily while my money kept growing.
So yeah, I'd go for the cash value.