By Julie Jason, originally posted on Forbes.com.
Who won the $1 billion+ Mega Millions lottery drawing of July 29, 2022?
No announcement has been made as of yet, and in fact, it is possible that we may never know the identity of the winner. (The winning ticket was purchased in Illinois, a state that permits lottery-winner anonymity for those who win prizes of $250,000 or more.)
Just for fun, let’s assume YOU are the winner.
There are some important time-related decisions you need to make — some immediate and some long term. Let’s talk about them.
By now, of course, you would have signed the back of the ticket and put it in a safe place. Also, you would have sought legal advice and thought about payout options: a) lump sum, also called the “cash option,” or b) annuity.
There is a time limit to claiming lump sum, and it’s just around the corner. If you want the cash option payout, you need to schedule an appointment with the Illinois Lottery to claim the prize soon. (See below for how to do that.)
Your First Important Deadline: September 27
If you are thinking about the cash option, don’t delay. Reach out to your attorney to make sure you don’t miss a 60-day deadline. According to the Illinois Lottery Winners’ Handbook, you have only 60 calendar days after the date of the drawing to select the cash option. In this case, the 60-day deadline is Sept. 27, 2022, according to an Illinois Lottery spokesperson.
Let me emphasize this one more time: Make sure you double and triple check with your lawyer to confirm how much time you have before you lose the choice of electing the cash option.
The Illinois Lottery website encourages you to call its hotline as well, but again, do this only after getting appropriate legal advice. The website invites winners of a prize of over $1 million to call the Illinois Lottery Player Hotline (800-252-1775, option No. 9) to speak with an Illinois Lottery representative.
Let’s Talk Dollars
You may think that a $1.3 billion winning ticket will pay out a lump sum of $1.3 billion before taking taxes into account.
If you are looking to put $1.3 billion (less taxes) in the bank, so to speak, the figure is considerably lower. An Illinois Lottery spokesperson explained that the amount would be “only” $780.5 million (pre-tax) instead of $1.3 billion (pre-tax).
There is a difference between the advertised amount and the actual cash option.
The Mega Millions website describes the cash option as “A one-time, lump-sum payment that is equal to all the cash in the Mega Millions jackpot prize pool.”
The California Lottery Winner’s Handbook adds a little more clarity: If you choose the cash option for Mega Millions, “you will receive the estimated cash value of the jackpot and not the advertised jackpot amount.”
On the other hand, “If you choose to take the annuity, you will, after 30 years, receive the full advertised amount.”
Taking the Annuity
Assuming you present your ticket on time (see “Another Deadline” below), and you don’t opt for the cash option, you will receive annual payments over 30 years.
The initial annual annuity payment would be an estimated $20.1 million (pre-tax), according to the Illinois Lottery spokesperson. The 29 annual payments that follow would each increase by 5%, with the final payment being approximately $83 million. Wow.
If you have the winning ticket but don’t come forward on time, you could lose the annual annuity payment option as well, which leaves you with zero winnings.
Your deadline? The July 29, 2022, Mega Millions winner has until July 29, 2023, to present the winning ticket, according to the Illinois Lottery spokesperson. That’s exactly a year after the drawing, the deadline set out in the Illinois Lottery Winners’ Handbook. Again, be sure to have legal counsel working with you as you plan your course of action.
Dear Winner: Don’t delay.
What If You Miss The Second Deadline?
In case you were wondering what happens if you miss the second deadline, the money that could have been yours goes back to the states. According to the Mega Millions website FAQs page, “each participating state in the Mega Millions game will get back all the money that state contributed to the unclaimed jackpot.”
Before You Make Your Claim, Get Financial Advice
Dear Winner: Don’t ignore the biggie: Who will help you manage your winnings?
As the author of a book just published by the American Bar Association called “The Discerning Investor,” I can share a few insights about how to choose the appropriate kind of help.
Be guided by the U.S. Securities and Exchange Commission.
There are different laws that regulate financial advice givers. Former SEC Chair Jay Clayton laid out a very simple rule:
“Do you want someone managing your account on an ongoing basis based on your broad financial goals and needs and movements in the markets? If so, an investment adviser may be best for you. . . .
“Or do you plan to buy a few stocks, bonds, mutual funds or ETFs and hold them for the long term with a few adjustments over the years? In that case, a broker[-dealer] may be best for you.”
My advice? Choose an investment adviser that specializes in managing the ultra-high-net-worth. Or set up your own shop, an organization called a “family office,” that provides all the financial, accounting and tax help that you will no doubt need for years and years to come.
If you’ve won a lottery or acquired newfound wealth, and want to share your experiences with me anonymously for an article, write to me at firstname.lastname@example.org.
Also, write to me if you would like to learn more about the special issues involved with ultra-high-net-worth services or about how to set up a family office.
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