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Winning the $365 million lottery…yes will get you to the top income tax bracket BUT… February 20, 2006

…but will is solve your problems?
Someone in Nebraska just won a record winning $365 million Powerball, but until the winner has sought legal counsel or financial counsel, we won’t know who won.

My friend has a good philosophy about buying Lotto tickets. He only buys when the jackpot exceeds, say, $200 million. Not buying a ticket gives you 0% chance of winning, but buying one ticket gives you an infinite increase in winning a lotto jackpot, so $1 is worth that chance.

The ticket holder has the option of taking the money in one lump sum or installments over 30 years. The cash option is $177.3 million, or $124.1 million after taxes. On the installment plan, the first payment would be $6,507,986 after taxes. As I posted in my “Tax Around the World” series on Canada, lottery winnings aren’t taxed, so they would’ve won the full $365 million, but $124.1 million after taxes in the US isn’t too shabby.

I rarely buy lottery tickets, but my wife bought $5 worth. Needless to say, we did not win, but had we won, my wife told me that she will give half to charity, some to our parents, but wouldn’t give cash to any of our siblings. She said that by giving my sisters cash, they would always expect more, and it wouldn’t be good for their relationship with us and with material things. She would pay for their education, or their kids education, but it would do a dis-service to them by making money the focus of our relationship with them. My initial reaction was that this is pretty harsh, but the more I thought about it, the more I agree. The richest people in the world like Bill Gates and Warren Buffett don’t believe in passing down too much money to their kids because they want their kids to be self sufficient and work for money. I respect that. Better to have their money spent on universities or research on a cure for diseases than a bunch of Paris Hiltons in the world. The self made wealthy people are entitled to use their money for social causes and not pass on everything to their kids.

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