The odds of hitting Powerball fantasy, and what to do when you win

For that $2 you dropped on a Powerball ticket, you bought a fantasy.

You can imagine winning the record-breaking $1.5 billion and dream about who would you tell off and in what order, picture yourself on a luxury yacht or doling out money as a philanthropist, and until a winner is drawn, no one can say you are wrong.

But the odds are 1 in 292.2 million you’ll win. You have a far better chance of being elected president, 1 in 10 million, or being struck by lightning twice in your lifetime, 1 in 9 million. Heck, according to CNN Money, your odds are better to be struck by lightning while drowning, 1 in 183 million. (Now that would be a very bad day.)

But since we won’t know until Wednesday, if then, who won, we’ll indulge your fantasy a little bit longer. Let’s just say you beat the odds and can collect the cash.

Your first decision: Do you take it all as a lump sum or spread the payments out as an annuity?

There are benefits to either approach. If you opt for a lump sum, the payout would be $868 million. The $1.5 billion is the payout if you stretched it out over 30 years.

Now don’t rush to the lottery office to cash your ticket. And by all means, don’t go running around with the ticket in your hand telling everybody you won.

“I’d consult with an attorney who does estate planning prior to contacting Lottery authorities,” said Dennis Fagan, founder of Fagan Associates, an independent financial advisory firm based in Troy. “You could gift some of it out to your kids and say you went in on it together, maybe set up a charitable remainder trust.”

By setting up a charitable foundation, he said, you could relieve some of the tax burden. Of course, you’d also be committing to giving some of the money away. (You wouldn’t really keep it all for yourself, would you?)

But for many people, the reason they bought a ticket is because everyone else in the office joined a pool. Yeah, you know you’re not going to win, but who wants to be the dunce left in the office when everyone else hits the jackpot?

An office pool can be tricky business if not handled right. Some winners have faced lawsuits upon claiming that they bought the lucky ticket separately from the ones they got for the office, and some people have launched legal battles claiming Joe gave the money to Sally to give to Bob to buy a ticket and if Sally forgot but remembered to hand over the cash to buy her own, well, then that’s just ridiculous and I’m going to sue for my share.

The New York Gaming Commission issued advice Monday to people putting together an office pool. It suggests appointing a leader responsible for collecting the funds and keeping track of who contributed. It recommends agreeing who will buy the tickets, when and where it will be done, and providing a copy of all tickets purchased to everyone in the group before the drawing.

The commission also suggested limiting the size of an office pool to 10 or less, as the New York Lottery will issue checks to up to 10 individuals.

Oops. What if your pool is bigger than that?

The commission offered three options: One would be to pick 10 individuals to collect the prize and be responsible for paying the taxes. They could then distribute the money to everyone else.

OK, that might seem problematic. You could all form a limited liability company and list each person as a member. The lottery pays the prize to the LLC under its tax ID number. The group leader would then be responsible for the payouts to each group member.

Another option is to form a trust and list each member as a beneficiary. The lottery would make the prize directly available to the trust using its tax identification number. The trust would make the disbursements to the group.

And if you all win, you’ll all have to agree as a group: Lump sum or the annuity?

“The best practice would be that they consult together,” said Lee Park, a spokesman for the New York Gaming Commission.

Whether you win in a group or alone, you shouldn’t quit your job right away. You’re not given the cash immediately.

The state reviews the backgrounds of the winners – all of them if it’s an office pool – to make sure there are no outstanding debts. Owe money for child support? It’s going to be taken out of your winnings first.

Oh, and taxes. The lottery will automatically take out 25 percent of the winnings to go toward federal income tax. Since the top-tier rate is 39.5 percent, you can expect to pay more around April 15.

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