Jul 13, 2018 4 min read

Have you ever dreamed of hitting a huge lottery jackpot? You may get a chance tonight, as the Mega Millions jackpot is estimated to be $340 million.

What would you do if you won all of this money? Have a plan. This planning usually starts after you win, because the odds are very small – one in 258,890,850.

Often, groups of co-workers purchase tickets with the intention of sharing in any winnings. This gives you more chances to win something. Of course, splitting with co-workers will reduce your share of the total value.

Everyone who buys tickets this way should have a photocopy of all tickets the group owns. There have been court cases in which someone claimed the winning ticket he or she had was an individual purchase and not part of the group’s holdings. This would likely end up in court.

If you win, the first thing you need to do is keep quiet. Winners are swamped with requests from friends, relatives and people they didn’t know before. Maybe turn off your social media accounts and tell very few people. Form a team with a lawyer, an accountant and a financial planner. Many experts suggest signing the back of the ticket and making several copies to prove ownership if you are separated from your winning ticket.

Where you buy a winning ticket determines whether your name is made public. In Pennsylvania, your identity will be revealed. If you bought the ticket in Ohio, you may be able to conceal your winnings.

Do not make a special trip outside Pennsylvania just for this purpose, but if you are out of state, that is a big benefit. It might be a good idea to go on a trip for a week or two to let things quiet down.

Sometimes, you can create a trust of family limited partnership to help protect your identity. People can still possibly identify you, but it takes more work. You need to make sure you have an up-to-date estate plan because things can change quickly. Also, there cannot be holes in your liability insurance because your odds of being sued will increase if you are thought to have deep pockets.

Taxes will claim a big share of your winnings. You will be in the maximum income tax rate of 37 percent. Pennsylvania used to exempt winnings of residents if they purchased their tickets in state, but that changed. You will pay state taxes and the new federal tax law passed in December limits your deductions for paying local taxes to $10,000.

You will have to make a decision whether to take a lump-sum payment or receive your prize over 30 annual installments. Receiving your winnings over time may be more beneficial because the undistributed money will be earning during the 30 years.

An individual who is not good with money may be better off not receiving a lump sum. There have been a number of reported cases in which winners won millions of dollars and were bankrupt a few years later.

If you can control spending and have a good financial team, you can often earn more by taking the reduced lump sum and investing. With this size of investments, your asset allocation would include many things that a normal citizen does not need to consider.

As with all gambling, do not spend more buying tickets than you can afford to lose. Buying tickets is not an investment, it is a way to help senior citizens and have a very small chance to have a different life.

Remember: one in 258,890,850 win! Good luck, anyway.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.