A lottery player’s life could be changed forever on Tuesday with the Mega Millions jackpot reaching an astonishing $1.1 billion.
No one matched the six numbers released on Friday, meaning the draw at 11 pm ET on January 10 could see the winner walk away with $568.7 million in cash if they take the lump sum payout.
The temptation to throw a lavish part to celebrate will be strong—but should the winner reveal themselves – even to friends and family?
Wealth management experts strongly warn against it.
‘Keep quiet’ if you win the lottery
Personal finance guru Sue Hayward advises those who have a wealth windfall to keep the news to themselves: “Once you’ve told people you’ve won, the secret’s out,” she said.
“Keep quiet. You can always take the decision to tell family and friends later.
“Take time to think and adjust. We all think we know what we’d do if we won the lottery but in reality how we react to a life-changing event like this can be very different.”
On top of that, whoever takes home the mega prize will have a tax headache to contend with first.
The top federal rate for individual income taxes in 2023 is 37% so the winner would owe the IRS around $210.4 million on the lump sum, depending on a host of considerations including any deductions a winner might take, leaving you with roughly $358.3 million, according to USA Mega (it’s less than 37% of the total because of the U.S. marginal tax rate system).
Then, the IRS automatically takes 24% when you win, and you'll pay the rest of what you owe next year when you file your 2023 tax return.
How much you pay is dependent on where you live. California for example doesn't levy lottery winnings whereas New York slaps on a 10.9% final tax.
If you must tell people, keep it vague
Richard Ross, a wealth manager, succession and exit strategist, advised caution even with members of family.
Having worked with clients who have come into large sums of money which impacted their relationships, Ross said details of winnings should be kept vague.
He added: "It can be hard to hide wealth from friends and family - especially sums like this. With friends, I would suggest telling them you had some financial luck but not even mention the lottery as that rather gives away how much you've won.
"With an amount like this it should be thought of as separate from yourself - a business account as opposed to personal. If you own a business you wouldn't tell a friend how much profit you've made or how, so the same process should be used here."
Ross Elder, managing partner at London-based Lincoln Private Investment Office, added: "We are firmly of the view that any large sums of money should remain private."
What if you're asked for money?
Should word get out that someone has had a financial windfall, there are a few easy steps people can take to reduce the risk of embarrassing confrontations over cash requests.
Ross advised individuals to take inspiration from Bill Gates, explaining: "In the past couple of years I've had more clients setting up charitable trusts in their lifetimes, so they can see the positive impact their money is having. That gives them greater pleasure than any investment.
"If you have a trust with strategic objectives then should anyone ask for help you can refer them to that organization to see if it can help independently."
Elder similarly advised that individuals should seek out a firm that put their needs first, explaining: "Your adviser should sit on the same table as you.
"We would spend time understanding our client and ensuring that they had an appropriate long-term investment strategy as well as a plan for their philanthropic goals and even personal gifting. This ensures that any approaches that are made will only need to be reviewed if they fit within that plan."
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