Mega Millions lottery tickets
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If You Take the Lottery Annuity and Die, Here's What Happens

Danielle Letenyei - Author
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Jul. 27 2022, Published 12:36 p.m. ET

No one won the Mega Millions drawing on July 26, so now the jackpot is over $1 billion. It’s the fourth-largest grand prize in the history of the U.S. lottery. As consumers rush out to buy tickets for the next drawing on Friday, July 29, many have already spent the money in their heads or are trying to decide whether they’ll take the lump sum or the annuity. If you take the lottery annuity and die, what happens to the rest of the money?

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If you’re lucky enough to beat the 1-in-303 million odds and win the Mega Millions jackpot, taking the winnings in an annuity means the pot will be spread out in annual payments over 30 years. You don’t have to worry about losing those winnings if you die. The payments will be passed on to your estate and beneficiaries.

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Should you take the annuity or the cash?

Whether to take the lottery winnings in a cash payout or an annuity is a question many lottery players hope they will someday have to make. In the long run, you’ll receive more of the prize money if you take the annuity than if you take the winnings in a lump sum.

On July 29, the Mega Millions jackpot is estimated at $1.025 billion. Here’s how that prize looks on the different payout options:

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Lump sum/cash option – If you opt to take the cash option for your winnings, the gross payout you’ll receive will only be about 61 percent of the total jackpot, so the amount would be about $625 million. That payment is then subject to a 24 percent federal tax and whatever the tax rate is in your state. For example, if you live in Wisconsin, your winnings will be subject to a 7.65 percent state tax. After the various government agencies have taken their piece of the pie, your winnings will be closer to about $427 million.

Annuity – With the annuity, your winnings are spread out in annual payments over 30 years. The same federal and state taxes are taken out, but this time the taxes are out of the full $1.025 billion. Every year, the payments gradually increase and, in the end, the net payout will be about $700 million.

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The majority of lottery winners take the lump sum with the hopes of investing it and making more money. However, taking the lump sum may not be the best decision if you aren't good at managing your finances. A 2011 study of lottery winners in Florida who took the cash payout found that winners are more likely to declare bankruptcy within three to five years than the average American.

You won the lottery, now what?

On the off chance that you actually win the lottery, don’t tell anyone, not even your mother. If word gets out that you just won over $1 billion, you can expect people you haven’t spoken to in years to come out of the woodwork looking to benefit from your good fortune. Some experts even recommend that you delete your social media pages.

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