Jul 13, 2023 4 min read

Did you ever dream of hitting a huge lottery jackpot? With two multimillion-dollar prizes up for grabs this week, you might get a chance, albeit a slim one. Odds of winning are 1 in almost 300 million.

What would you do if you did win? Have a plan.

Oftentimes, groups of co-workers have gone together to purchase pooled tickets that they plan to share if they win. It increases your chances of winning, but it also reduces your share’s total value. If you buy tickets in a pool, everyone should have a copy of all tickets the group owns. There have been court cases in which the bearer of the winning ticket claimed it was purchased individually and not part of the group’s holdings.

If you do win, the first thing you need to do is keep quiet. Winners are swamped with requests from friends, relatives and others seeking financial gain. “Maybe turn off your social media accounts and tell very few people. Put together a team consisting of a lawyer, accountant and 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 bought your ticket determines if you have to be publicly identified. In Pennsylvania, your identity will be revealed. If you bought the ticket in Ohio, you may be able to conceal your identity. If you win, it might be a good idea to go away on a trip for a week or two until the news dies down.

Sometimes you can create a trust or family limited partnership to help protect your identity. People can still possibly identify you, but it takes more work. You need to make sure that you have an up-to-date estate plan because things can change quickly. Also, there cannot be any 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%. Pennsylvania used to exempt winnings of residents if they purchased their tickets in state, but that changed in the new law. You will pay state taxes, and the federal tax law 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 payments. The figure announced as the prize is if you take your winnings over time. It is bigger because the undistributed money will be earning interest during the 30 years.

Someone who is not fiscally responsible might spend everything and may need to not have total access. 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 the odds, and good luck anyway!

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.”

If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.