How would you advise the 3 MegaMillions winners?

golfallday · Post by **golfallday** » Sat Mar 31, 2012 9:52 am

Apparently 3 tickets won in Maryland, Kansas, and Illinois. The $$$ probably must be invested in taxable accounts. What investments and what allocations? I fully understand some tax lawyers, CPAs, and CFPs might be stingy with advice on this board. Just wondering.

hicabob · Post by **hicabob** » Sat Mar 31, 2012 10:08 am

the lottery investors had a pathetic return rate .... from Yahoo news ...

"Americans spent nearly $1.5 billion for a chance to hit the jackpot, which amounts to a $462 million lump sum and around $347 million after federal tax withholding. With the jackpot odds at 1 in 176 million, it would cost $176 million to buy up every combination. Under that scenario, the strategy would win $171 million less if your state also withholds taxes."

I would advise them not to "invest" in lotteries anymore

peppers · Post by **peppers** » Sat Mar 31, 2012 10:20 am

Hide.

NERD777 · Post by **NERD777** » Sat Mar 31, 2012 10:24 am

I would advise them:
20% (VTSAX) Total Stock
20% (VTIAX) Total International
30% (VBIRX) Short Term Bond Index
10% (VWEAX) High Yield Bond Fund
15% (BWX) Unhedged Foreign Bond ETF
5% Precious Metals.

Somewhat similar to my own portfolio although a bit more conservative

The Wizard · Post by **The Wizard** » Sat Mar 31, 2012 10:31 am

I wouldn't advise them.
I'd just study them as Science Experiments, to the extent possible...

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

exoilman · Post by **exoilman** » Sat Mar 31, 2012 10:37 am

Tell no one, visit doctor for blood pressure and physical. After doctor visit take the xanax or valium he prescribed and go home. Your mind will slow and then pay attention to the wiser minds on this site. Also recommend psychologist.

Sam

hicabob · Post by **hicabob** » Sat Mar 31, 2012 10:41 am

The Wizard wrote:I wouldn't advise them.

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.

momar · Post by **momar** » Sat Mar 31, 2012 10:43 am

hicabob wrote:
The Wizard wrote:I wouldn't advise them.

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.

There is no state tax in Cali on lottery winnings.

Nukeboilermaker · Post by **Nukeboilermaker** » Sat Mar 31, 2012 10:45 am

The Wizard wrote:I wouldn't advise them.
Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

I was actually thinking about that as well... One could save anywhere from 3-10%? Just by changing the state of residence? Plus, in theory a winner could shop around the sale of their annuity and possibly get a greater lump sum?

The Wizard · Post by **The Wizard** » Sat Mar 31, 2012 10:46 am

hicabob wrote:
The Wizard wrote:I wouldn't advise them.

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.

That's called a Source Tax and is illegal per SCOTUS.
If I came into big bux in CA, I'd head for the other side of Lake Tahoe ASAP.
A lot of Google-aires do just that, I believe...

lws6772 · Post by **lws6772** » Sat Mar 31, 2012 10:48 am

ENJOY

Harold · Post by **Harold** » Sat Mar 31, 2012 10:59 am

The Wizard wrote:I wouldn't advise them.
I'd just study them as Science Experiments, to the extent possible...

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

Though I wish the best for them, I've had to admit to myself that I'm deeply curious to know how quickly and in what manner they are going to squander this. Was actually hoping for a single winner so I could see how it would even be possible. Let's hope otherwise, and that we see a much needed foundation established, rather than a fleet of lamborghinis unleashed on the roadways.

VictoriaF · Post by **VictoriaF** » Sat Mar 31, 2012 11:37 am

golfallday wrote:Apparently 3 tickets won in Maryland, Kansas, and Illinois.

Great selection of states. I hope the local winner improves the Maryland economy, however she chooses to spend her windfall.

Victoria

kerplunk · Post by **kerplunk** » Sat Mar 31, 2012 11:54 am

Let's assume that you received an unexpected, gigantic windfall and you wanted to hold the majority of the money in bonds. Where could you put it? If you had, say $200,000,000 and only $20,000 of tax-advantaged space, where would you put the money?

You could put in a municipal bond fund... but wouldn't that not be diversified enough for safety?

Would you just put it in Total Bond Market, regardless of the tax disadvantages?

sometimesinvestor · Post by **sometimesinvestor** » Sat Mar 31, 2012 1:51 pm

[quote="The Wizard"]I wouldn't advise them.
I'd just study them as Science Experiments, to the extent possible...

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...[/quote]

It is my understanding that with low current rates the lump sum is a better bet as the present value of an annuity is much higher when interest rates are low. Of course as I think the wizard is implying, if they don't understand what the last sentence means there is a fair chance they shouldn't take the lump sum

VictoriaF · Post by **VictoriaF** » Sat Mar 31, 2012 3:17 pm

sometimesinvestor wrote:
The Wizard wrote:I wouldn't advise them.
I'd just study them as Science Experiments, to the extent possible...

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

It is my understanding that with low current rates the lump sum is a better bet as the present value of an annuity is much higher when interest rates are low. Of course as I think the wizard is implying, if they don't understand what the last sentence means there is a fair chance they shouldn't take the lump sum

I understand what the last sentence means, but that does not mean that the low annuity rates should guide a winner's decision. The winners who take the lump sum will have to invest it in something. Safe fixed income investments currently provide low rates. Putting much of the winnings into the market is risky at the current levels. Should they take a lump sum and keep most of it in the money market, waiting for the rates to improve?

Any planning based on the projections of where the markets will go relies on a fair amount of uncertainty. Saving state income tax by requesting periodic payments and moving to Florida (or Nevada, or Texas, etc.) is a sure thing.

Victoria

Atilla · Post by **Atilla** » Sat Mar 31, 2012 4:52 pm

Disappear.

xerty24 · Post by **xerty24** » Sat Mar 31, 2012 5:58 pm

Good thing my Roth IRA bought the lucky ticket, while my personal luck wasn't quite as good. Maybe now I can join the ranks of those despised for having really big retirement accounts.

HardKnocker · Post by **HardKnocker** » Sat Mar 31, 2012 5:59 pm

Move

Change your name

Have plastic surgery to change your face

stevewolfe · Post by **stevewolfe** » Sat Mar 31, 2012 6:04 pm

Don't quit your day job - at least for a little while. Might save you the plastic surgery.

pteam · Post by **pteam** » Sat Mar 31, 2012 6:16 pm

Did any of them claim it anonymously or claim it under a corporation name anonymously?

Mudpuppy · Post by **Mudpuppy** » Sat Mar 31, 2012 7:48 pm

HardKnocker wrote:Move

Change your name

Have plastic surgery to change your face

A bit excessive for the two who live in states that allow one to claim a lottery prize anonymously. Perhaps good advice for the third person though.

In any event, it doesn't much matter what we would advise them, they're likely to choose a traditional wealth manager who goes against all Boglehead tenets. It's like a whole different sort of "lottery" when it comes to that side of the finance world.

stemikger · Post by **stemikger** » Sat Mar 31, 2012 9:18 pm

I think this is impossible to answer without knowing these people and what the fabric of their character is made of. That is what will most likely dictate how they come out the other side of this blessing or possible curse.

I would send them copies of a documentary series I saw a few times entitled "How the Lottery Ruined My Life".

VictoriaF · Post by **VictoriaF** » Sat Mar 31, 2012 9:47 pm

When I win I will follow this advice:

WikiAnswers wrote:Actually, your best bet is to sign the back of the ticket. Then go find yourself a good lawyer and have the attorney set up a trust with a bank. The trust will need a name. Let's name it the " BigWin Trust". Once BigWin Trust is properly set up the lawyer will have one of the bank officers present the winning ticket to the lottery agency and accept the winnings on behalf of the BigWin Trust. This is legal in the states that have Powerball. Not sure about Megamillion states. But, sign the ticket, put it in a safe place, see a lawyer, set up a trust and then keep your mouth shut and no one will ever know.

Victoria

TF Hutch · Post by **TF Hutch** » Sat Mar 31, 2012 10:00 pm

I would plan on keeping about a third in TIPs and giving the rest to Bill and Melinda Gates foundation. They could do more with the 70% than I could.

grabiner · Post by **grabiner** » Sat Mar 31, 2012 10:13 pm

The Wizard wrote:
hicabob wrote:I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.
That's called a Source Tax and is illegal per SCOTUS.
If I came into big bux in CA, I'd head for the other side of Lake Tahoe ASAP.
A lot of Google-aires do just that, I believe...

Do you have a reference for the ruling? I couldn't find it, but I believe that the ruling is much narrower. A state cannot tax a non-resident on a pension based on work in that state, but it can tax other income which has a source in that state; thus, for example, if you live in NJ and work in NY, your income has a NY source and is taxable in NY (and you can take a credit against your NJ tax). And I believe the ruling even allows a state to tax deferred compensation; if you live in NJ and work in NY, all your salary earned in NY is taxable in NY even if some of it is paid in a year after you retire.

Default User BR · Post by **Default User BR** » Sun Apr 01, 2012 1:06 pm

pteam wrote:Did any of them claim it anonymously or claim it under a corporation name anonymously?

In Illinois apparently the winner has to make a personal appearance. The other state allow claiming anonymously. The Illinois ticket was sold in the city of Red Bud, about 40 miles from St. Louis, so the local TV stations all sent reports to interview the very happy store owner that sold it. They get a big chunk of money as well.

Brian

hicabob · Post by **hicabob** » Sun Apr 01, 2012 1:08 pm

grabiner wrote:
The Wizard wrote:
hicabob wrote:I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.
That's called a Source Tax and is illegal per SCOTUS.
If I came into big bux in CA, I'd head for the other side of Lake Tahoe ASAP.
A lot of Google-aires do just that, I believe...
Do you have a reference for the ruling? I couldn't find it, but I believe that the ruling is much narrower. A state cannot tax a non-resident on a pension based on work in that state, but it can tax other income which has a source in that state; thus, for example, if you live in NJ and work in NY, your income has a NY source and is taxable in NY (and you can take a credit against your NJ tax). And I believe the ruling even allows a state to tax deferred compensation; if you live in NJ and work in NY, all your salary earned in NY is taxable in NY even if some of it is paid in a year after you retire.

I would also be interested in a ref - 1 CPA, 1 enrolled agent, and one lawyer/CPA has advised me not to try to escape "the claw". In fact I have heard that California thinks it should be able to tax 401k distros that were accumulated in Cali then moved when the owner moves.

hicabob · Post by **hicabob** » Sun Apr 01, 2012 8:07 pm

grabiner wrote:
The Wizard wrote:
hicabob wrote:I'm not sure that would work? - in California for example, I have been led to believe that money "earned" in cali is subject to cali income tax and that the infamous "California tax claw" will aggressively pursue those who try to avoid it.
That's called a Source Tax and is illegal per SCOTUS.
If I came into big bux in CA, I'd head for the other side of Lake Tahoe ASAP.
A lot of Google-aires do just that, I believe...
Do you have a reference for the ruling? I couldn't find it, but I believe that the ruling is much narrower. A state cannot tax a non-resident on a pension based on work in that state, but it can tax other income which has a source in that state; thus, for example, if you live in NJ and work in NY, your income has a NY source and is taxable in NY (and you can take a credit against your NJ tax). And I believe the ruling even allows a state to tax deferred compensation; if you live in NJ and work in NY, all your salary earned in NY is taxable in NY even if some of it is paid in a year after you retire.

Perhaps this is what the wiz was referring to?

http://www.pmstax.com/state/bull9602.shtml

seems to cover pensions only.

White Coat Investor · Sun Apr 01, 2012 11:08 pm

Take the annuity option. That way after you blow the first couple year's payments you get another 18 tries.

Littlerhody · Post by **Littlerhody** » Mon Apr 02, 2012 9:00 am

The Wizard wrote:I wouldn't advise them.
I'd just study them as Science Experiments, to the extent possible...

Actually, I'd advise them to take the annuity payout, but then move to a state with zero state income tax for the remaining 25 payments.
But those types don't care; they always take the Lump Sum...

This is actually poor advice on a few different levels unless the winners are so irresponsible that they would blow the lump sum after a few years.
If one takes the annuity option....future federal and state income taxes will most likely be higher. Also, by taking the lump sum, one can grow the money to an amount that should far exceed annuity payments over 25 plus years.
Something no one is considering is estate taxes. An attorney in my state said that if the winner is an elderly person and takes the annuity option and dies a year after the big win; the estate of the winner will owe federal and state estate taxes based an the ENTIRE amount won NOT the annual future payments!
So unless there are extraordinary circumstances...always always always take the lump sum payout.

hand · Post by **hand** » Mon Apr 02, 2012 2:49 pm

VictoriaF wrote:When I win I will follow this advice:

WikiAnswers wrote:Actually, your best bet is to sign the back of the ticket. Then go find yourself a good lawyer and have the attorney set up a trust with a bank. The trust will need a name. Let's name it the " BigWin Trust". Once BigWin Trust is properly set up the lawyer will have one of the bank officers present the winning ticket to the lottery agency and accept the winnings on behalf of the BigWin Trust. This is legal in the states that have Powerball. Not sure about Megamillion states. But, sign the ticket, put it in a safe place, see a lawyer, set up a trust and then keep your mouth shut and no one will ever know.
Victoria

How do you stay anonymous if your name is written on the back of the winning ticket?

investor · Post by **investor** » Mon Apr 02, 2012 3:12 pm

How do you stay anonymous if your name is written on the back of the winning ticket?

very poor handwriting

investor

KyleAAA · Post by **KyleAAA** » Mon Apr 02, 2012 3:14 pm

I don't think I would want to claim the prize anonymously. I think all the drama and headache would be fun for me in a weird way. I enjoy telling people no.

VictoriaF · Post by **VictoriaF** » Mon Apr 02, 2012 3:56 pm

hand wrote:
VictoriaF wrote:When I win I will follow this advice:

WikiAnswers wrote:Actually, your best bet is to sign the back of the ticket. Then go find yourself a good lawyer and have the attorney set up a trust with a bank. The trust will need a name. Let's name it the " BigWin Trust". Once BigWin Trust is properly set up the lawyer will have one of the bank officers present the winning ticket to the lottery agency and accept the winnings on behalf of the BigWin Trust. This is legal in the states that have Powerball. Not sure about Megamillion states. But, sign the ticket, put it in a safe place, see a lawyer, set up a trust and then keep your mouth shut and no one will ever know.
Victoria
How do you stay anonymous if your name is written on the back of the winning ticket?

On the back of the ticket I will write my screen name, VictoriaF

Victoria

Bogleheads.org

How would you advise the 3 MegaMillions winners?

How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?

Re: How would you advise the 3 MegaMillions winners?