Jan 15, 2021 4 min read

Did you ever dream of hitting a huge lottery jackpot? You might get a chance this week, because the two interstate lottery prizes total over $1 billion. What would you do if you won all of this money?

Have a plan. This planning really starts after you win, because the odds are very small – one in almost 300 million.

Many times, groups of co-workers have gone together to purchase pooled tickets with a plan to share the money if they win. This gives you more chances to win something. Of course, splitting with co-workers will reduce the value of your share.

If you buy tickets this way, everyone should have a photocopy of all tickets the group owns. There have been court cases in which someone claimed the winning ticket was his or her individual purchase, and not part of the group’s holdings. A case like this would likely end up in court.

If you win the jackpot, the first thing you need to do is keep quiet. Winners are swamped with requests from friends, relatives and people seeking help whom they didn’t know before. Maybe turn off your social media accounts and tell very few people. Put together a team 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 buy your winning ticket determines whether you have to be named publicly as the winner. 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 across state lines just for this purpose, but if you are there, that is a big benefit. If you win, it might be a good idea to take a trip for a week or two to let some of the news cycle die down.

Sometimes, you can create a trust or family limited partnership to help protect your identity. People could 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 taking your winning over time. It is bigger because the undistributed money will be earning interest during the 30 years.

Someone who is not good with money and will spend everything might 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 investment, your asset allocation would include many things that a normal citizen does not need to consider.

As with all gambling, do not spend more money buying tickets than you can afford. This is not an investment, it is a way to help senior citizens, and you have a very small chance to have a different life. Remember, one in 300 million!

Good luck anyway.

Gary Boatman is a Monessen-based certified financial planner and the 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.