This subject has been nearly beaten to death, and you can find a lot of opinions on it by using the search feature.
For starters, ignore anybody who offers a cookie cutter approach, whether it's to always take the cash, always take the annuity, take cash up to some amount and annuity over that, or anything else. It's a personal decision that should be the result of considering what you'd like to do with the money and what the financial realities are. What's a perfectly good decision for one person may not be the best for somebody else.
If you don't want to deal with the hassles of investing and your life expectancy isn't much more than the payout period the annuity is probably a very good choice. You'll get a predictable and guaranteed income every year, and there's a good chance the payments will continue until you die and it isn't your problem what happens after that.
If you expect to live much beyond the payment period you will need to deal with some investment hassles regardless of which payment option you choose. If you choose the annuity you have to invest some of it every year or when the payments stop your income will drop to almost nothing
One of the arguments for taking cash is that you can get the same or better investment as the lottery, and there's certainly some truth to that. The lottery invests the cash value and gets a guaranteed payment and you can do that, too. If you're willing to accept some risk you may well be able to earn a higher rate, but you could also lose everything. If interest rates rise, you may be able to take advantage of that if oyu aren't locked intot he current rtes for a long period. FWIW here's a blanket statement I don't think anyone should argue with: anyone who takes the cash and doesn't put a good chunk into a safe, guaranteed investment is just asking for a chance to be poor later on.
IMHO, the biggest advantage of taking cash isn't the chance that you can do better than the annuity. It's the flexibility to use the money as you choose. Of course you can also borrow against the future income of the annuity. The biggest advantage of taking the annuity is that you get to defer the taxes and earn interest on them until they are due. There's also a modest benefit in getting to apply your annual deduction multiple times to the annual payments instead of ony getting one single deduction against the single lump sum payment. If you're married and file jointly everything under $350,000 will be taxed at less than the maximum rate. Over 26 years that means an extra $8.75 million will be taxed at lower rates.
To keep it simple, let's look at a $26 million annuity for MM. If you take the annuity you'll get an annual income of $1 million for the next 26 years. I'll assume federal and state taxes total 40% less $30,000 from the portion that isn't taxed at the top rate. That would be $630,000 annually after taxes. If you take the cash you'd getabout $15.25 million, which would net about $9.15 million after taxes. Invested at a fairly safe 5.5% you'd have a pre-tax income of $503,000 and about $332,000 after taxes. The annuity could give you almost twice as much spending power each year, but if you actually spend it all you'll be broke when the payments stop. By investing the lump sum the annual income can continue forever (ignoring the possibility that estate taxes will take a big chunk of what your heirs eventually end up with). If you spent the same $332,000 available from the lump sum and invested the remaining $298,000 in a tax deferred investment at 5.5% you'd have about $17 million after 25 years. $7.75 million would be from your annual investments and $9.25 million would be taxable interest. Even if you paid taxes at the regular income tax rate of 40% you'd have $13.3 million, or $4.14 million more than if you'd taken the cash up front.
Obviously, what you spend, how you invest, and the tax implications (and there's no telling what might happen with taxes in the future) can result in major changes to the scenario I describe. With a difference of over $4 million between the two choices the money spent on good advice from a professional would be your best investment.
