Let’s say I have one either of these and opt for the annuity instead of the cash-out. How secure is my money over the next 30 years-Is there any chance banks could fold or the government gets greedy and decides to change a law or two to give it access to the account?
Also, if I decide to move to a state with no state income tax, can I increase my yearly pay-out, or is it set for life at the rate of the state I first make my claim?
That one is on the edge of “factual” IMO – ISTM even if you take the cash value pay-out you’d have the same chance that the banks will fold, or the government will try to hit you for a tax on annuity disbursements abive X amout, or the general economy really bites The Big One and salaries start getting paid in totebags of 10 million dollar banknotes. That will kick you in the delicates just as much whether you are taking in 50 million a year or have 500 million in investment accounts.
Technically the federal and state governments are not allowed to pass laws abridging lawfully entered contract obligations (such as paying the lottery winners), but as far as I can understand nothing prevents the passing of a wealth/capital tax, even a high one, except political considerations.
And the base amount of the installment pay-out is what it is. You take taxes off of that. What happens with nonfederal taxation is up to the laws of the respective states and according to this page only Arizona and Maryland tax lottery earnings of nonresident winners, so, yeah, you’d end up keeping more of it once the accountants are done if you move to a non-income-tax jurisdiction.
You don’t need to have any bank credit risk if you don’t want it - you can put the money in Treasury Bills. Your risk then is only that the U.S. Government defaults (an apocalyptic scenario). You will have paid tax on the principal amount of the payout at the time you took it; your ongoing income tax obligation from the income your nest-egg generates will be the same as the tax on any other income, the original source of funds from the lottery is irrelevant at that point.
I have no idea if it’s legally possible that they might change lottery annuity payouts, but I don’t see that it entails any bank risk either way. Your annuity payments are a state or federal government obligation, not a bank obligation.
As I understand (ANAA -I Am Not An American) you are taxed in the jurisdiction where you make your money. If you win with a Minnesota ticket and take your winnings or an annuity, it’s income in Minnesota. Or Maryland. ?
I assume the bit about Maryland and Arizona means if you won in Minnesota and moved to Maryland, you’d pay taxes in Minnesota then as a resident of Maryland, pay whatever taxes on the annuity would be due there - i.e. deduct Minnesota taxes from the amount Maryland would claim. …and still pay the feds.
Even if I bought a ticket and returned to Canada, AFAIK I’d be taxed on the amount by the US feds and the state that sold me the ticket. Just… no taxes on winnings in Canada.
So… buy your tickets in a no-tax state?
I suppose the answer for the OP is that with a lump sum, you can diversify your holdings so that you are not dependent on one bank, or one country - you can buy a few Picasso’s or Van Gogh’s or gold doubloons to keep you in bacon if the economy tanks.
That can get complicated, and as I am not an accountant (that’s why I hire one to do my taxes) I can only speak for my own experience.
I have lived in one state and worked in another. There are several possible scenarios, but the result for me was that I paid state tax on my income in the state in which I lived and not the state in which I earned that money, but that is something I opted into (on the advice of my accountant at the time). Some states have a reciprocal agreement which means you could pay the tax in either state and you’re food. Some counties and cities also have a local income tax which they want you to pay regardless of where you live.
It’s complicated. Way more complicated than it should be, and in my more suspicious/paranoid moments I sometimes wonder if that is by design.
I am not certain how the various laws impact a high-dollar lottery winner, but that’s why if I ever do win a huge prize (unlikely, not only given the odds but also how seldom I play) my first two actions will be to hire a financial advisor/accountant and a lawyer.
If you’re planning ahead, move to a no-tax state and then buy the winning ticket. And if possible, find a state that also allows you to claim the prize anonymously.
Way more confusing. Some states tax non-resident income from a source in that state. Different states tax different sources of income, so that State A might tax anything earned in State A by non-residents while State B only taxes wages earned by non-residents. There may or may not be a credit given by one state for taxes paid to the other. What that post was saying is that if you lived in Florida and won on a ticket bought in Maryland, you would have to pay taxes to Maryland even if you never lived there.
But it’s not accurate that only Arizona and Maryland tax non-resident winners. New York does as well, if the total proceeds are more than $5000 and New Jersey taxes non-residents on prizes over $10,000. And it’s not new . In NY it applies to prizes won after 2000 and NJ after 2009. There are probably others, but I just happen to know those two.
Yes, I’ve read something about pro sports and major entertainment figures and the issues they have by performing in multiple states, like with a concert tour. It certainly keeps the tax accountants busy.
I’m assuming with a moderate amount of annuity, say $200,000 or less, there’s a tax savings in being able to claim part of it in the lower tax brackets each year. When you’re talking tens of millions a year, the savings are probably irrelevant. (i.e. no tax on the first $10,000 then a lower tax on the next $20,000 or something like that…)
Sorry:
I can never resist a funny (and apposite) typo.
That’s not how tax brackets work. You pay a percentage of the income in each tier of the money, but having 10s of millions of income doesn’t mean you pay more on that first $10k.
Sure, but if I’m getting tens of millions a year, paying a lower rate on the first $10K wouldn’t matter to me as much as it would if that $10K was 5% of my income. So it would be more to my advantage tax-wise to spread out a 2 million dollar prize over 20 years than it would be to spread out a billion dollar prize.
So, positing the economy is going to crash, killing banks and investment schemes, what would be the issue [I suppose one could call it that] with taking it in cash and not investing it in a money investment scheme, or banking it but actually hoiking off to Majorca or Lichtenstein or Ulan Bator, wherever they are easy on US expats and vanishing so the government can’t find one to tax one [since us US peeps get taxed no matter where the hell in the world we are, and I think even if we subsequently dump our citizenship]
With that kind of cash I think it would firstly be fairly easy to swot up a new country to live in, with a sparkly new ID and not needing to worry about cutting coupons to afford medical care [this sort of posits one hides half of ones cash assets from the new country] Sort of like a criminal laundering their ID to hide.
Let’s all agree that if we win several hundred million dollars we’ll be happy and pay our taxes without complaint. Civic duty and all that.
And let’s all agree that any such winnings will be used to buy SDMB and implement get-paid-to-post.
Yes, that’s what I meant. If you pay 50% in the top tax bracket, then avoiding $5,000 in taxes by spreading out the income over several years is more relevant when you have $200,000 a year than when you have $20,000,000 a year. Maybe because I don’t have that issue, it seems to me that once you’re up to $20M a year, who cares if the state takes a chunk of it? What were you planning to do that $10M/yr isn’t sufficient?
(It’s what I’d call the “Elon Musk Principle”. If your stock options for Tesla are $44B in one year in one lump sum, who cares if the government takes $20B in income taxes? Even after the single biggest personal income tax payment in history, he’s still $24B ahead. With that kind of money, your best bet is to buy a money-losing enterprise to generate a tax write-off of business losses, maybe… 
)