Winner of document $1.6 billion-plus Mega Tens of millions jackpot will have to be careful for those pitfalls, professionals warn

The Mega Tens of millions jackpot grew to greater than $1.6 billion on Aug. 9, 2023.

Justin Sullivan | Getty Photographs

There may be in the end a winner for the huge Mega Tens of millions jackpot — however the fortunate ticketholder would possibly face surprising pitfalls, professionals say.

A unmarried price ticket bought in Florida matched all six numbers Tuesday evening, marking the sport’s biggest prize in historical past, in step with Mega Tens of millions. The successful numbers had been 13, 19, 20, 32 and 33, and the gold Mega Ball was once 14.

After ultimate gross sales counts, the jackpot is price $1.602 billion, beating the former document of $1.537 billion from October 2018.

The fortunate winner has two payout alternatives: a one-time lump sum of $794.2 million or 30 annuitized bills totaling the $1.6 billion-plus. Each choices are pretax estimates.

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Whether or not the winner alternatives the lump sum or annuity bills, each choices include a large tax invoice, which is one pitfall to believe.

Whilst Florida does not tax lottery winnings, there may be an prematurely 24% federal tax withholding that is going to the IRS. If the winner chooses the $794.2 million lump sum, they’re going to owe just about $190.6 million up entrance. However with the winner hitting the 37% federal source of revenue tax bracket, the overall invoice will probably be thousands and thousands extra.

‘The curse of the lottery is actual’

Along with taxes, the Mega Tens of millions winner will most likely stumble upon different hindrances, professionals say.

“Let’s simply say the curse of the lottery is actual,” stated Andrew Stoltmann, a Chicago-based attorney who has represented a number of lottery winners.

Let’s simply say the curse of the lottery is actual.

Andrew Stoltmann

Lawyer at Stoltmann Legislation

Many of us taking part in the lottery do not need the infrastructure of monetary advisors or different execs they are able to simply faucet for steering once they win. “And they do not have the information base to care for a big amount of money,” he stated.

Commonplace blunders would possibly come with unhealthy investments, overspending and family members soliciting for more cash, Stoltmann stated.

Successful the lottery generally is a ‘blessing or a curse’

The winner can even have a number of estate-planning demanding situations, in step with Warren Racusin, a wealth making plans legal professional and spouse at Lowenstein Sandler.

“Whilst you get 1000000000 and a 1/2 greenbacks, Uncle Sam turns into your 40% spouse in that,” he stated.

For 2023, the federal property tax exemption is $12.92 million, or double for married {couples} submitting in combination. With out adjustments from Congress, the ones thresholds will drop more or less one-half after 2025 when provisions sundown from the Republicans’ 2017 signature tax overhaul.

The highest 40% federal property tax charge would possibly observe to belongings above the ones thresholds, relying on a number of elements.

In fact, there are a number of making plans tactics, which would possibly come with positive forms of trusts, that may lend a hand the lottery winner reach their legacy targets whilst minimizing the property tax invoice.

“That is one thing that may be a blessing or a curse,” Racusin stated. “In the event you care for it proper, it may be a blessing.”

Tuesday’s Mega Tens of millions drawing comes more or less 3 weeks after a unmarried price ticket bought in California received Powerball’s $1.08 billion jackpot. That sport’s best prize is back off to $170 million, with more or less 1 in 292 million odds of successful the jackpot.