The Mega Millions jackpot has increased to $540 million. If you win the jackpot, one of the first things you want to do is assemble a team of legal and financial advisors handpicked by you and require that they work together. Be sure to check with your state disciplinary authorities and industry regulatory agencies to see if there have been any complaints filed against each advisor. Your advisors will provide checks and balances on each other and assist you with planning and guidance for future investments, steps to protect your assets and to help vet requests for financial assistance from people or organizations that you don’t want to make.
It is important to see a tax professional before you redeem the winning ticket. A tax professional can help you decide whether to take the prize money all at once or have it paid out over 26 annual payments in the form of an annuity.
If you take a lump sum payment, you must immediately pay tax on the entire amount. If you choose to take the annuity payments, you are taxed only as you receive the payments. However, you will want to work with a tax professional to determine the benefit of taking your money as a lump sum payment, paying the taxes and investing the proceeds vs. the effective yield of the annuity payments.
According to the website www.usamega.com, the chart below gives you a general idea of what the payout would be after taxes for your winnings:
Annuity Cash Mega Millions Jackpot
for Fri, Mar 30, 2012 $540,000,000 $390,000,000 Gross Prize 26 annual payments
of $20,769,231 Lump-sum cash:
$390,000,000 – 25% Federal Tax – $5,192,308 – $97,500,000 Subtotal $15,576,923 $292,500,000 – State Tax: California: No State Tax on Lottery Prizes! Your net per year:
$15,576,923 After 26 payments:
$404,999,998 Your net payout:
You have 60 days from the time you claim your lottery prize to weigh the pros and cons. A financial advisor can help you determine which type of payment suits you best and assist you with tax planning for future long and short-term goals, tax strategies and charitable contributions.
An estate planning attorney is also essential to review your estate plan and assist you in planning for estate tax, especially if you want to share some of your fortune with family and friends.
Even if you don’t win the lottery, we welcome you to contact the team at Allen Barron, Inc. and Janathan L. Allen, APC today at 866-631-3470 for a complimentary initial consultation for tax services, tax planning services or estate planning services today.