The Mega Millions jackpot reaches $ 850 million. How to manage a windfall

Once again, the Mega Millions jackpot has catapulted higher.

The top prize is now $ 850 million – the third largest in lottery history – after no tickets matched all of the numbers drawn on Friday night. Then there’s Powerball: its jackpot is estimated at $ 640 million for Saturday night’s draw.

Of course, the odds of winning either game are not in your favor: the odds of a single ticket matching all six numbers are 1 in 302 million for Mega Millions and 1 in 292 million for Powerball.

Nonetheless, it’s still worth considering how you would handle such a windfall if you had to beat the odds.

Jackpot winners typically have six months to a year to claim their prize, depending on the state in which it was purchased. This usually means there is no need to rush to the lottery headquarters.

In other words, the winners have to breathe deeply.

Whoever ends up hitting either jackpot should be prepared for a roller coaster of emotions.

Experts say that once the initial excitement of winning the jackpot wears off, the scale of their windfall may set in.

“For anyone who experiences newly created wealth … there is a sense of dislocation and a sense of being overwhelmed,” said Valerie Galinskaya, executive director and head of the Merrill Center for Family Wealth.

Of course, you don’t have to go it alone.

Given the size of these jackpots, winners should assemble a team of experienced professionals – including a lawyer, CPA, and financial advisor – to help them navigate the windfall.

“You want to hire the right advisers who can not only provide you with great advice, but also advice tailored to your needs and wants,” Galinskaya said.

You need to make a copy of your note, put it in a safe place – that is, a safe or a bank vault – and resist the urge to share your news with everyone. world in your life.

“Don’t talk to people right away about it except to your immediate and trusted family,” said certified financial planner Jim Shagawat, a New Jersey-based partner advisor at AdvicePeriod of Los Angeles.

Additionally, you should protect your identity when claiming the jackpot, if possible. While the standard advice is to sign the back of the note, it could interfere with remaining anonymous if state laws allow you to set up a trust or limited liability company to claim the windfall instead of doing so on your own. own name.

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If your state’s laws require that your name be publicly announced, it’s worth planning how to respond if others bring up your boon in the conversation, Galinskaya said.

“You say, ‘I’m really grateful and we’re still working on what this means for us,’” she said.

For the $ 850 million Mega Millions jackpot, the cash option – which most winners choose instead of an annuity – is $ 628.2 million.

Before that gets to you, however, 24% – or $ 150.8 million – will be withheld for federal taxes. You could also count on a much higher debt to Uncle Sam due to the higher marginal rate of 37% applying to income over $ 523,600 for individual filers and $ 628,300 for married couples filing. jointly. State taxes are also generally due.

For Powerball’s $ 640 million jackpot, the lump sum option is $ 478.7 million. The 24% holdback would be approximately $ 114.9 million. And, again, more would be due.

One way to lower your tax bill is to think charitably. Basically the government gives you tax break if you use private money to do public good.

“It’s not just about what you want to do for yourself and your family, but also philanthropically,” Galinskaya said.

You can contribute cash, up to 60% of your adjusted gross income, to a public charity or donor advised fund and get a tax deduction for the amount in the year you donate. You can also set up a private foundation, give it income, and then determine over time how to use it.