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Someone in Michigan is kicking off their weekend a whole lot richer.
A single ticket sold in the Wolverine State hit all six numbers drawn Friday night to land the $1 billion Mega Millions jackpot. The prize had been climbing for 37 weeks with no winners through twice-weekly drawings. It now has reset to $20 million.
If you’re holding that valuable slip of paper, be aware that your life is about to change dramatically, experts say. And while you might be eager to claim your winnings, you don’t need to rush to headquarters immediately.
In other words, take a deep breath.
Protect your ticket and yourself
Assemble a team of pros
Before you head to lottery headquarters, you should assemble a team of experienced professionals: an attorney, accountant and financial advisor.
“You want to have thoughtful [experts] guide you through the emotional side of winning but also the obligation that comes with having this kind of wealth,” said CPA Mark Alaimo, a member of the personal financial specialist committee for the American Institute of CPAs.
Someone on the team should also serve as a gatekeeper. That is, they can field requests from moochers or scammers or even friends and family members who end up wanting a piece of your windfall.
The tax bill
You get to choose between taking your winnings as either a lump sum or an annuity paid over 30 years. 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 — will be withheld for federal taxes. You can expect more to be due at tax time, thanks to the top marginal tax rate of 37%. Michigan state taxes, at a rate of 4.5%, would also be due or withheld.
Think philanthropically
One way to reduce your tax bill is to think charitably.
You can contribute cash, up to 60% of your adjusted gross income, to a public charity or a donor-advised fund and get a tax deduction for the amount in the year you make the donation.
You also could create a private foundation, donate income to it and then determine over time how to employ it.
“A private foundation can run programs,” Alaimo said. “You could open and run a soup kitchen that’s owned by the foundation.
“With a donor-advised fund, you can only donate to [an existing] soup kitchen.”