From the article: “Another thing to consider when trying to make the winnings last is to choose to receive the money over time instead of taking the lump-sum payout. The annuity would pay out the winnings over a 30-year period, which would keep some winners from blowing through the cash in a few years, says Andrew Stoltmann, a Chicago-based investment fraud lawyer who has represented lottery winners who sued their advisers.”
Of course that maybe sound advice but we’ve all seen the “It’s My Money and I want it Now!” commercials. A lot of folks blow through the annual allotment and then call JD Wentworth and wind up getting even less for their money.
Another problem with this strategy is this. Suppose your 60 years old and you sign up for the annual payout over 30 years. Most likely you’ll be dead before the end of the 30 years. You leave the remaining payout to your heirs. Guess what. Your heirs owe taxes to the feds on the proceeds. Taxes on the whole remaining amount.
For example. Suppose this jackpot hits $750M or $25M per year. Suppose you die with 20 years remaining. The feds want you to pay taxes on $500M immediately, that tax year. You’ll only be getting $25M that year but your heirs will still owe, maybe $150M in taxes. Call JD Wentworth, they need the money now. Between the federal and state taxes and what JD will hold out, they will wind up with very little. The only way around that is a very big life insurance policy which, if you’re fairly old, will be very expensive.
Me, I’ll take the lump sum and try to stretch it out. I’ll hire an assistant to open my mail and tell most everyone to buzz off.
My dad tells me, “if you’re under 50, take it over time...if you’re over 50, lump sum”.
Sadly, I live in one of those states where you can’t remain anonymous. I’m not sure how one could pull off ‘disappearing’ after a huge lottery win if you’re required to be identified.