Mega Millions jackpot hits $1.1 billion — and the big winner could face these costly pitfalls

Wealth

The Mega Millions jackpot grew to more than $1.6 billion on Aug. 9, 2023.
Justin Sullivan | Getty Images

The Mega Millions jackpot soared to an estimated $1.1 billion without a ticket matching all six balls on Friday night.

It’s smaller than last year’s record $1.6 billion grand prize, but the victor could still face some costly pitfalls, experts say.

The next big winner will have two payout options — a $525.8 million lump sum or an annuity worth $1.1 billion, according to Mega Millions. Both choices are pretax estimates.

More from Personal Finance:
‘Gray divorce’ has doubled since the ’90s. The financial risk is high for women
How Social Security benefits may change under Republican, Democrat proposals
Home price growth is back at pre-pandemic levels. What that means for buyers and sellers

The next drawing is Tuesday at 11 p.m. ET, and the chances of scoring the Mega Millions jackpot is roughly 1 in 302 million. 

State taxes can be hefty

“None of these winners think about taxes until they have a third of it going right to Uncle Sam and the state government,” said Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners.

None of these winners think about taxes until they have a third of it going right to Uncle Sam and the state government.
Andrew Stoltmann
Lawyer

Eight states — including California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — don’t levy income taxes on lottery winnings.

However, you must redeem the winning ticket in the state where you bought it, meaning an out-of-state purchase in a high-tax state could trigger a bigger bill.

But the annuity payout could save on future state taxes, depending on where you choose to live, Stoltmann said. The annuity includes an initial sum followed by 29 annual payments.

Sign and secure the ticket

Lottery winners have a set timeline to come forward and collect their money — and some prizes have gone unclaimed.

“Sign your ticket, take photos and scans and then secure it,” said Michael Whitty, partner at law firm Smith, Gambrell and Russell, who has also advised past lottery winners.

Mega Millions says it’s critical to “protect yourself” by signing the back of your ticket. Otherwise, anyone who holds the winning ticket can file a claim to collect the proceeds.

Alternatively, there may be ways to protect your privacy by claiming the prize money via a trust or limited liability corporation. Regardless, you should consult an attorney first.

Avoid a ‘legal catfight’ on shared tickets

You could also have winning ticket issues when pooling money with friends or co-workers, according to Stoltmann.

“The nastiest legal catfights happen when a group of people buy a ticket together” and one person claims they bought the winning ticket alone, he said.

You should always have a “basic written agreement” that outlines who purchased the tickets, the numbers on those shared tickets and how the group will split the money if there’s a winner, Stoltmann said.

Mega Millions isn’t the only way to win big. The Powerball jackpot has ballooned to an estimated $800 million without a big winner from Saturday night’s drawing. The chances of scoring the grand prize for that game are roughly 1 in 292 million.

Products You May Like

Articles You May Like

The right mix of retirement accounts can lower your future taxes, experts say — here’s what to know
JPMorgan’s Jamie Dimon warns inflation and interest rates may stay higher
Delta says the Olympics will cost it $100 million as travelers skip Paris
‘Make or break week:’ Stifel sees 40% chance of President Biden dropping out of the race
Paramount agrees to merge with Skydance

Leave a Reply

Your email address will not be published. Required fields are marked *