LOS ANGELES: For the winner of a US$1.26bil Mega Millions jackpot ticket sold in California, the ecstasy of the big win may soon give way to the anxiety over some big choices.
“This is a life changing moment and they don’t need to make every decision right away,” said Matthew Liebman, chief executive officer and founding partner of Amplius Wealth Advisors.
Liebman’s first piece of advice was to build strong relationship with four different advisers – a wealth adviser, a tax accountant, an estate attorney and a therapist before making any decision about payout.
Last Friday’s jackpot was the fifth-largest Mega Millions prize in US history and the winning ticket was sold at Sunshine Food and Gas in Cottonwood, a census designated area with a population of about 6,000 people, in Shasta County, about 240km north of Sacramento.
The identity of the winner, or winners, wasn’t immediately known.
While most lottery grand prize winners typically chose the cash payout, which in this case will be about US$571.9mil, financial planners still say there’s reason to opt for the annuity – distributed over 30 annual payments.
“The annuity typically is a bigger payout,” said Anthony Love, managing director of tax and trust at Quotient Wealth Partners.
If the winner is young and healthy, it’s probably a better option, he advised.
Those who take the annuity can also avoid the potential pitfall of watching their earnings evaporate through bad investments or other financial decisions.
If the winner is older, the lump sum may be the better choice, Love said.
“If you accept the lump sum, you get all the money at one time,” he said.
“You get to invest the money however you want it to be invested, and you’re paying tax at a time where the effective tax rate is the lowest in a generation.”
Massive lottery prizes in the United States have become increasingly common in recent years, attributed to changes in game rules and higher ticket prices.
Since 2016, more than 10 jackpots have exceeded US$1bil, including three in 2024 alone.
Billionaire Mark Cuban has also had some well-considered advice for lottery winners.
He told the Dallas Morning News in 2016 that winners should hire a tax attorney, avoid taking the lump sum and say no to friends and relatives who ask for money.
Having a lot of money won’t instantly make you a good investor, so winners should also put money in the bank and keep it safe, he said.
Liebman, of Amplius Wealth Advisors, also advised the winning ticket holder to take a deep breath.
“I say that seriously because, from what I have understood from past lottery winners, is that it can be a big strain on their mental health,” he said. — Bloomberg
