WESTFIELD – The Powerball drawing has reached 1.5 billion as of Tuesday after 19 consecutive drawings without a top prize winner, a world record for any lottery jackpot game, according to the Massachusetts State Lottery Commission.
A lot of people are asking what they would do with the money if they were to win.
“That’s probably what a lot of people are talking about,” said Financial Planner Tim Flynn of Edward Jones in Westfield.
“There are a number of things. Don’t rush. Remain quiet about it as long as you can. Try to stay anonymous,” Flynn said.
Flynn suggested choosing an attorney, tax CPA and financial advisor that will work together, and maybe even have two teams working for you. He said to redo your estate plan, ensuring your legacy is forever with your family and any charitable organizations that you’ve been involved with or want to become involved with.
“Make it a lifetime for all of your family members,” he said. “Don’t spend anything right away. Try to live your lifestyle except for paying off all your debts. There’s nothing like being debt-free, it’s a great feeling.”
Flynn advised to invest prudently, which from his perspective is 50/50 stocks to bonds, with no high risk. He also advised against buying a lot of real estate, “because you’re going to have to manage that, whereas stocks and bonds your advisor more or less manages. Make sure you sign your winning ticket right away.”
“The first thing I would suggest is to take some time to make some decisions. Seek the advice of a lawyer, accountant and financial planner,” said Attorney Ed Pollard from Pollard & Pollard in Westfield.
“Set up a plan right from the beginning, to ensure the longevity of the funds, to keep the future of the funds safe,” he said. “Planning is probably the most important thing.”
Pollard said lottery wins are not a common event in his estate planning practice. Gift taxes and estate taxes need to be considered.
“Avoid hasty spending, hasty decisions. Avoid making massive changes right away. Small changes, prior planning and consulting with professionals is probably the smartest thing to do,” he said.
“I think it’s a wonderful problem to have,” he said. “provided they’re (the winner) not someone who might cause themselves other problems.”
He said someone with a gambling problem or other addictions might get in trouble. Other problems he foresaw were family problems and relationship problems.
“The toughest part for people is family,” he said. “Try to maintain an even keel. Be reasonable. Try to be fair.”
He said people should also consider their estate. For example, if they have a family member with special needs, does winning something make a difference to that family member qualifying for certain programs?
Pollard said everyone might come knocking on the door.
“Do some planning, explain that’s what you’ve done at the advice of professionals,” he said.
“As long as it doesn’t cause someone to go beyond their means,” he said. “It’s not a good financial plan, or estate plan or life plan to depend on it to pay the bills.”
“You have a choice when you win,” said Mark Morin, an accountant with Morin & O’Shea in Westfield, who has dealt with lottery winners in the past. He said the choice is to take an annuity of $50 million a year for thirty years, or a lump sum which is 38 percent, or approx. $958,000,000 of 1.5 billion, according to Morin.
“But then you have to pay taxes on both of them,” Morin added. He said federal taxes are 40 percent, and the state around 5 percent. “As far as what I’d advise people to do, I think it would be based on your age.”
If someone is older or near the end of his life, Morin suggested taking the lump sum, paying the taxes, and getting it over with.
“With an annuity, you’re into estate tax complications. If you took the annuity, the estate tax remaining would be 40 percent, which means the executor would have to borrow a loan to pay the taxes on it,” he said.
Morin suggested talking to an estate planner along with someone who is a tax professional. For example, there is a limit on gifting to an individual of $14,000 without tax consequences. “But when it comes to paying for education,” he said. “there is no limit on that. You’d be able to pay for all your friends’ and relatives’ college education.”
“I personally think it’s too much money to win in one shot,” he said. “There should be a cap. It’s going to be a headache.”
He said the winner would be inundated with every organization looking for money, every small business with a good idea.
“You’re obviously going to be in a position to make donations to non-profit organizations locally, as well as nationally,” he said. “Can you imagine the number of phone calls, people who you haven’t heard from in 20 years?”
Prob Reshamwala, owner of Mina’s Wine and Spirits in Westfield, said everybody is talking about what they’d do with the money.
“People talk about it, just like we all do,” Reshamwala said. “We enjoy talking and dreaming about it. 1.5 billion? It’s crazy,” he said.
He said his store sold a lot of tickets on Saturday, and he expects sales to pick up Tuesday evening and Wednesday.
“It will be busy tonight and tomorrow,” he said on Tuesday afternoon. “During the week, there is no paycheck. On Saturday, they had Friday’s paycheck. A lot of people live paycheck-to-paycheck.”
“When people spend their money on the lottery, it affects other businesses,” he said. “That’s the worst part.”
He said it’s just like when people go to the casino.
“There is no money left to spend in the town,” he said.
Reshamwala said that the store gets a 5 percent commission on lottery sales, and a 1 percent commission on winnings. If they were to sell the winning ticket, the store would receive $50,000, which is the maximum commission.
“If I get the winner here, that would be good for the publicity,” he said. “On the positive side, it would be more publicity for downtown Westfield.”
Regardless, once the winner is picked, he said he’ll be able to focus on his business, and not just the lottery.
“You lose the focus on the real business. In the long run, it’s not a good thing for us,” he said.
As of Saturday’s drawing, the Mass. Lottery had sold over $53.8 million in Powerball tickets, generating $3.2 million in commissions and bonuses for lottery retailers and approximately $22.6 million in revenue for the Commonwealth, the vast majority of which goes to unrestricted local aid for cities and towns, according to Christian Teja of the Massachusetts State Lottery Commission. Teja said that 42 percent of all Powerball sales is net profit, which goes to local aid revenue for the Commonwealth.
Powerball tickets are $2 each and can be played in 44 states, Washington D.C., Puerto Rico and the U.S. Virgin Islands. “All participating lotteries fund the prize pool,” Teja said. If the jackpot is drawn in Massachusetts, the state does not get an additional commission, but “the state would be in line for substantial income tax,” he said.
“Playing Powerball and the lottery is fun, and we want it to remain fun,” Teja said. “We want to remind people to play responsibly and spend only what you can afford to spend.”
