The prize is the fifth largest in Powerball history and the seventh largest U.S. lottery jackpot of all time, according to Powerball.com.
"Can you imagine if you won? Your whole world would be turned upside down. It would be hard to think straight, it would be hard to talk straight," says Robert Pagliarini, president of California-based financial firm Pacifica Wealth Advisors.
"But now that money will be taxed, and it could be taxed twice," he told Grow ahead of Monday's drawing. "It'll be taxed at the federal level, because the federal government has a tax on any lottery winnings. And then each state is a little bit different on how they tax things," says Pagliarini, who is also the author of the book "The Sudden Wealth Solution: 12 Principles to Transform Sudden Wealth Into Lasting Wealth." California does not tax lottery winnings, so the winning ticket holder has the added luck of being taxed just once at the federal level.
Here's the estimated tax bite for the nearly $700 million jackpot.
If the winner opts to take the $496 million lump sum, the federal tax withholding would be around $119 million. Since the ticket was sold in California, the winner would pay no state tax on the prize.
Let's say the winner lived in New York, which has the highest state tax on lottery winnings. There, the winner would pay approximately an additional $45 million in taxes, according to the lottery site USAMega.com.
Those figures are just what's withheld before anyone is even awarded the check. The recipient would owe more taxes come tax time: up to the top tax rate of 37%.
If they decide to take the annuity payments, which would amount to about $23.3 million per year for the next 30 years, they'd have about $5.6 million in federal taxes withheld, and pay the remaining bill, up to the top tax rate of 37%, at tax time next year, according to USAMega.com.
The decisions you make if you win will be "the most significant financial decisions you'll ever make in your life, so it really helps to get some people involved who know what they're doing," says Pagliarini.
Just any tax or financial professional won't do, says Michael Karwic, a certified financial planner at the Zajac Group in Pennsylvania and a certified financial transitionist at the Sudden Money Institute. "You might have someone who crunches your numbers and does your 1040 every year for you ... but can they really handle a $685 million payout or a $485 million lump sum?"
Video by Stephen Parkhurst
"Tax planning isn't just about minimizing income taxes today. If this has just become a multigenerational wealth item, you really need to plan that from the start," says Karwic.
He suggests "building an expert team of a financial advisor, a tax person, and an estate planner." You don't want to look back 20 or 30 years from now and think, "If we would have split it up in a different way, or set up a trust or something, we could have had much lower taxes for the next generation," he says.
Thinking about ways to pay it forward can also lower your tax burden and leave you feeling fulfilled, Karwic points out. "You can enhance the value of your dollars that are going to do good in the world, whether it's good for your own family, or if it's good for strangers, or good for the Earth, or whatever causes you believe in," he says. "Proper tax planning actually can help you do more good out there in the world."
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