Despite the tremendous odds against it, every week or so somebody wins a state or multi-state lottery worth millions of dollars. A recent Mega Millions jackpot was worth a whopping $181 million. What would you do if you won? Well, the first thing you should do is read Susan Bradley’s 2000 book, Sudden Money: Managing a Financial Windfall. Here are some of her comments...
“Contrary to what you might have heard, there is no way to avoid paying tax on lottery money. Even if you give it all away to charity, you will still owe some taxes....Before you do anything with your new money, create a list of what you’d like to spend the money on. Take into account inflation, taxes, and any debt you have....If you were to win a $2 million lottery, you would have to pay (about) $800,000 in federal income taxes and maybe another $100,000 in state income taxes. That leaves your after-tax winnings at $1.1 million....Lotteries pay either a lump sum amount or equal payments over 20 or 30 years. Either way, determine how much you can spend each month by developing a cash management system based upon long-term income projections....You will be asked for money either as a loan or outright gift, or to put up money for someone to start a business or help a failing business. Generally speaking, it is better to give than to loan....Have a will. If you pass away before you have collected all of your lottery payments, your heirs will continue to receive the payments and may be liable for estate taxes. Have an estate planner create a plan to deal with all the possibilities.
