$250 Million Mega Millions has a $146.2 Million Cash Value
$300 Million powerball has a $140.3 Million Cash Value
PowerBall has a graduated annuity over 29 years (30 payments). Each year’s payment goes up 4% over the year before.
Mega millions pays an annuity over 25 years (26 payments).
You might think that PowerBall uses its longer payout and graduated annuity to pump up the size of its advertised prize. But according to the PowerBall web site, they do it to spare winners from life on fixed income.
I’ve said it before and I’ll say it again. You should spend 3/4 of it on 20 year old hookers and 40 year old scotch. Then switch their ages to 40 year old hookers and 20 year old scotch. Under no circumstances should either the scotch or the hookers be younger than 18 years old. A man’s got to have standards.
While there’s no question that this is really safe, if it were me I would put 50% in treasury bills, 30% in whatever equivalent Switzerland has to treasury bills, and 15% same for Japan. That way you have some protection if there is a catastrophic blow to the US Government. Which is really unlikely, but given the amount of money involved, it’s worth considering.
Eventually I would put a big chunk of money into stocks, another chunk into real estate, and so on. When you have that much money, you may as well diversify.
Oh man, that makes things complicated. I was figuring a simple 300-mil, 30 years, 10-mil per year. Is there some kind of calculator out there to figure what the annuity is per year?
Not that it matters right now since someone (not me) won Powerball yesterday, but I want to be prepared for next time.
The calculator would need to know the interest rate at which the Lottery Commission has invested the funds. Whenever I hear the news broadcast say things like “The jackpot is now at $X, but if you take the lump-sum you’ll get $Y”, the lump sum always seems to be around 40-60% of the jackpot. So I use 50% for my imaginary calculations.
I hear this kind of stuff all the time. The problem is that I don’t want merely a good investment advisor, I want someone who knows the ins and out of the lottery rules, so that I can maximize my return even before I show my ticket to the lottery commission.
For example: Here’s part of my daydream: If I win The Big One, I’ll have so much money that I can afford to give 5% or so to each of half-a-dozen or so very close family members. I figure that if I simply collect my winnings and give them a share, they’ll be double-taxed, because they’ll have to pay tax on what I give them, and that’ll just be from what remains after the tax that I had paid. So what I’d like to do is to give them not a share of my prize, but a share of my ticket. It would be like coworkers who all chipped in for a ticket, and they all own equal shares. But in my case, I’d own 70% of the ticket, and they’d each own 5% of it. I’d even ask them for a nickel each, so they’d actually be purshasing a share of it, fair and square.
And the question I need to ask is whether or not this works. I figure the law may be different in different states, so I’d need a lawyer/accountant who actually has real experience dealing with this stuff. How do I find such a person? I really doubt that the State Lottery Commission maintains a List Of Lawyers Recommended By Past MegaMillions Winners. And trying to contact such a winner personally would be next to impossible, I’d bet.
My second question would be if I wanted one of those half-dozen to be my favority charity. They probably can’t pay me the nickel, because I’d bet that if a charity uses its money for gambling they’le lose their tax-exempt status, but can I just give them a share of the ticket?
I wrote a whole long response, with all the numbers and calculations to show that you are wrong. Then I got to the bottom and realized you are right! Thanks!
No. In some rare cases (very large gifts), a gift can sometime be taxable to the person who gives it (the giftER) as a sort of advance Estate Tax. Altough a Gift Tax return has to be filed at a fairly low threshold.
wiki: *There are two levels of exemption from the gift tax. First, transfers of up to (as of 2006) $12,000 per person per year are not subject to the tax. An individual can make gifts up to this amount to as many people as they wish each year, and a married couple can make gifts up to twice that amount, without incurring any gift tax. Second, there is a credit that essentially negates the tax on gifts until a total of $1,000,000 has been given by one person to another (or, as the IRS puts it, “the unified credit against taxable gifts [is] $345,800 (exempting $1 million from tax)”.[2]
If an individual or couple makes gifts of more than the limit, gift tax is incurred. The individual or couple has the option of paying the gift taxes that year, or to use some of the “unified credit” that would otherwise reduce the estate tax. In some situations it may be advisable to pay the tax in advance to reduce the size of the estate.
But in many instances, an estate planning strategy is to give the maximum amount possible to as many people as possible to reduce the size of the estate (the effectiveness of this strategy is based on how long it can continue as obviously it cannot continue past death).
Furthermore, transfers (whether by bequest, gift, or inheritance) in excess of $1 million may be subject to a generation-skipping transfer tax if certain other criteria are met.
The United States has a Unified estate and gift tax.
*
DrDeth, thank you, especially because I know of someone who recently got a gift over the $12,000 limit (which I thought was only $10,000). He was pretty worried. Thanks!
My guess is that the Lottery itself probably can put you in touch with past winners and/or have a list of attorneys/financial advisors that they reccomend.
I got halfway through the second page and decided I just couldn’t read anymore.
I’ve watched TV specials about jackpot winners. It amazes me just how incredibly stupid people are. On the one hand, I understand on a very small scale. I inherited about $11k when I turned 18, and I blew through it in less than a year making stupid decisions and being far too generous around my friends. But on the other hand, I just don’t have taste extravagant enough to do the things that these people wind up doing. When I try to imagine it, I think it would take somewhere between $2 million and $3 million dollars for me to do everything I really wanted to do in my fantasy world. This includes buying a nice house. The rest of it, I could invest, and if I could find a way, through those investments, to live off of, say, $150k per year, I’d be set. And that’s living VERY comfortably.
Stories like the ones in that link just make me cringe.
