Odds suggest jackpot mainly opportunity to dream

Jan. 13--Don't feel disappointed if you did not become a multimillionaire in last Saturday's Powerball drawing. You now have a chance to be a billionaire with Wednesday night's drawing.

Well, almost a billionaire. The Powerball jackpot has hit an all-time record of $1.5 billion. The cash payout for that amount would be $930 million before taxes. The Missouri Lottery withholds 25 percent federal and 4 percent state taxes from the winnings.

No one matched all six numbers in Saturday's drawing, lifting the new jackpot to the highest ever offered in the world, lottery officials said.

Players in Missouri have until 8:59 p.m. to purchase Powerball tickets for Wednesday night's drawing. Players are advised to sign their tickets immediately and put them in a safe place. If you lose your ticket, without your signature, anyone can claim it.

Advice for the big winner -- lawyer up. In fact, you'll need help from several people who have expertise with money because your personal wealth will now rival that of corporations. The team you put together will function as your board of directors.

"You'll need a tax guy, an investment and financial guy, and an attorney for estate planning," said Don Swanson, a financial adviser with Edward Jones in Joplin. "It's a great problem to have. I would like to try it."

For those who do not seek guidance, the statistics tend to paint a rather bleak picture, Swanson said.

"I have handled some big inheritances, but nothing of that magnitude," he said. "But an inheritance is kind of the same thing. It's a windfall. You have to pay the taxes and make decisions about how to invest. You have to remember that there are predators out there and land mines out there in terms of people who will try to get you and your money.

"This sort of thing changes your life forever. Use common sense and be a good steward of that money so that your windfall can help the next generation."

Eric Reisinger, president of UMB Bank in Joplin, said a bank can help a lottery winner in some areas.

"But there are areas where you will need help that we are not experts in," he said. "We can help you set up a trust, but you also will need to seek advice from a lawyer or an accountant. Those are areas in which we do not specialize."

Reisinger said the federal insurance limit for a deposit is $250,000. The winner will need a financially strong bank that can protect such a large deposit. The American business magazine Forbes has compiled a list of the strongest banks.

Reisinger had already purchased a ticket for Wednesday night's drawing. "It's a great exercise," he said. "What would do if I won this money? It's so fun to dream."

Jim Hardy, with the Joplin accounting firm of Hardy, Wrestler and Associates, said the winner should first talk with a lawyer and an accountant about how to claim the prize.

"Every family situation is different," he said. "Minimizing their tax can be extremely complicated."

After that is done, Hardy said, the winner needs to figure out what's best in terms of budgets and expenditure plans.

"Some people will treat this money as found money," he said. "That means they will treat it differently than earned money. Instead of investing in college educations for their children, they will will try to start a new business and buy new cars. It could all be wasted in 12 months. You need to claim it, then live on it and manage it."

As Hardy suggested, the best way to minimize your tax hit would be to sit down with a tax planner after you win -- but before you claim the prize money publicly -- to figure out a plan based on what you want to do with the money.

Missouri law requires the disclosure of the winner's name and hometown. Missouri Lottery officials say the publishing of a winner's name ensures the integrity of the game because players who are never provided with actual names may not believe the games are real. Kansas is one of a handful of states that does not require public disclosure of the winner's name.

If you win big, here's a checklist of things to consider:

--Sign and secure your winning ticket, make copies of it and stash the original in a safe-deposit box.

--You'll have three months in most states to come forward with your winning ticket. Before you identify yourself, assemble a team consisting of a financial planner, a tax pro, an accountant and a lawyer, with the lawyer being your first call. A tax pro will help you make the choice between taking the prize money all at once or having it paid out in 30 installments over 29 years in the form of an annuity. With a lump-sum payment, you must immediately pay tax on the entire amount. With an annuity, you are taxed only as you receive the payments.

--Tell the fewest people possible and stay anonymous, if your state rules permit it. Another reason to hire a lawyer first is for help creating an entity, such as a revocable living trust or a family limited partnership that masks your personal identity.

--Pay off your debts. Whether it is credit card debt or a mortgage, your rate of return equals the interest rate on the loan.

--Avoid sudden lifestyle changes and live within a budget. One way to restrain yourself is to only spend income -- not principal.

The odds of you winning are 1 in 292.2 million, according to the Multi-State Lottery Association. Those odds don't change with a bigger pot or having more players. They're strictly based on how many combinations of numbers you can choose.

Powerball territory

Of the 47 lotteries that offer Powerball, Missouri is ranked second in terms of Powerball jackpot winners with 31, according to the Missouri Lottery.

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(c)2016 The Joplin Globe (Joplin, Mo.)

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