A 24-year-old Michigan woman has turned in a lottery ticket worth $66 million. What should she do next, or what should you do if it happens to you? Tax attorney Rob Wood discusses the happy situation, also the subject of his Forbes article “Savvy 24 Year Old's $66 Million Mega Lottery Win--On Friday The 13th.”
One unusual feature of this story is the winner’s young age. Wood notes that the young woman has been doing planning and getting tax advice so that she doesn’t get into the dilemmas that await someone who gets a windfall.
One question every winner confronts at the outset is whether to take the lump sum payment or to go for the annuity. The winner in this case took the lump sum. Wood suggests that he, too, would probably take the lump sum. Right now, interest rates are historically low, so locking in an annuity that is based on those low rates is less attractive.
The stories of winners who end up broke within a few years make the idea of an annuity more attractive. “This is a difficult conversation to have with people,” says Wood. The winner has to make this decision almost immediately, and it is difficult choice to make for people who aren’t already rich (which is likely everyone who has ever won a lottery). Getting protection from people who want to take advantage of the windfall is another factor in favor of taking the annuity.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.