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Someone in Michigan starts their weekend a lot richer.
A single ticket sold in Wolverine State hit all six numbers drawn on Friday night to win the $ 1 billion Mega Millions jackpot. The prize had risen through twice weekly drawings for 37 weeks with no winners. It has now been reset to $ 20 million.
When you have this precious piece of paper in hand, you should be aware that your life is about to change dramatically, experts say. And while you may be eager to claim your winnings, there is no need to rush to headquarters right away.
In other words, take a deep breath.
Protect your ticket and yourself
Put together a team of professionals
Before you go to the lottery headquarters, you should assemble a team of seasoned professionals: a lawyer, an accountant and a financial advisor.
"You want to be guided by thoughtful [experts] through the emotional side of winning, but also the commitment that comes with that kind of wealth," said CPA Mark Alaimo, a member of the American Institute of CPAs' Personal Financial Specialist Committee .
Someone on the team should also serve as the gatekeeper. That said, they can answer queries from moochers or scammers, or even friends and family members who want a piece of your godsend in the end.
The tax bill
You can choose to take your winnings either as a lump sum or as a 30 year pension. For the $ 1 billion Mega Millions jackpot, the cash option – which most winners choose – is $ 739.6 million.
However, before it reaches you, 24% – $ 177.5 million – is withheld for federal taxes. With the highest marginal tax rate of 37%, you can expect more to be due at tax time. Michigan state taxes of 4.5% would also be due or withheld.
One way to lower your tax burden is to think in a nonprofit way.
You can donate up to 60% of your Adjusted Gross Income in cash to a nonprofit or a donor-recommended fund and receive a tax deduction for the amount in the year you donate.
They can also set up a private foundation, donate their income, and then choose how to use it over time.
"A private foundation can run programs," said Alaimo. "You could open and run a soup kitchen owned by the foundation.
"With a fund recommended by donors, you can only donate to [an existing] soup kitchen."