Personal Finance

Mega Millions jackpot is $1.1 billion. How big winners can prep for 'the inevitable asking for money' from family, friends

Key Points
  • This jackpot marks the fourth time that the game's grand prize has climbed past $1 billion.
  • The upfront cash option, which most jackpot winners choose, is $568.7 million.
  • It's important to set parameters for how much of your windfall you'd share and under what circumstances, experts say.
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If you've never had family or friends hit you up for money, that is likely to change if you were to win Tuesday's $1.1 billion Mega Millions jackpot.

The grand prize has been climbing through twice-weekly drawings since mid-October, with no ticket matching all six numbers drawn to land the grand prize. This marks the fourth time the game's jackpot has passed $1 billion, and if won at this level it would be the fifth-largest lottery jackpot ever.

Of course, the advertised $1.1 billion for Tuesday night's drawing is what you'd get if you were to choose to take your winnings as an annuity spread over three decades. The lump-sum cash option — which most jackpot winners choose instead — is $576.8 million (as of mid-day Tuesday).

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While a chunk of your winnings would go to taxes, the amount you'd end up with after those levies would be more than most people see in a lifetime. It also may make you a target for people who want a piece of your newfound wealth, experts say.

Here are the odds of you winning the lottery
Here are the odds of you winning the lottery

Of course, not everyone will be preying on you, said Emily Irwin, managing director of advice and planning at Wells Fargo Wealth & Investment Management. "But ... you never know what's going to happen."

When "the inevitable asking for money occurs," she said, "how can you make sure you feel comfortable saying yes or no?"

Here are some tips to head off trouble.

Share the news with as few people as possible

If you manage to beat the odds stacked against a single ticket hitting the jackpot — the chance of hitting the motherlode Tuesday is about 1 in 302.6 million — one of the most important things to do is share the news with as few people as possible.

"It's hard for even your inner circle of people not to say anything," said certified financial planner Susan Bradley, founder of the Sudden Money Institute in Palm Beach Gardens, Florida.

If you can shield your identity from the public, that can help minimize who finds out and protect you from random strangers hoping to get a piece of your winnings. Some states allow you to claim anonymously, while in others you may be able to set up a legal entity — for example, a trust — that claims the windfall, thereby shielding your name from the public.

Create a plan for how and when to donate

Before you even claim your prize, you should set up a team of professionals to help you navigate your new wealth. This group should include at least an experienced attorney, financial advisor and tax advisor.

One thing you can think about during this pre-claiming phase, with the guidance of your team, is whether and how you want to use some of the winnings to benefit others.

Pichai Pipatkuldilok / Eyeem | Eyeem | Getty Images

Some jackpot winners tap their philanthropic side by either setting up a private foundation or using other tax-advantaged ways to make charitable contributions. If you determine from the start which causes you want to support — say, protecting the environment or battling hunger — it can make it easier and more rewarding to use those charitable dollars, experts say.

You also could determine a yearly limit to what you give away, whether to charities or individuals.

Set up boundaries for money going to family, friends

For sharing with family and friends, you also should set up parameters, Irwin said.

"I think it's helpful to think about under what terms you would gift money," Irwin said. "Are you now the bank for family?

"If there's a catastrophic event, will you be there?" she added. "If someone wants to start a business, would you be giving them seed money, or is it a loan?"

The benefit of establishing a plan, Irwin said, is that it can "eliminate feelings of guilt when you say no to individuals or organizations."

Moreover, without boundaries, she said, "you could be in a position where you're running through funds at an accelerated rate ... and finding yourself saying yes more often than you wish."

Additionally, keep in mind that some gifts come with "carrying costs" that need to be considered, Irwin said. For example, if you were to purchase an expensive home for yourself and each of your four siblings, those properties may come with ongoing, outsized bills and maintenance costs that you may be expected to cover.

Most importantly, winning hundreds of millions of dollars would be a chance to create long-term financial stability for you and loved ones if you approach it with foresight.

"Take care of yourself first and your family first," Irwin said. "Make sure you don't make decisions that could unduly harm your own balance sheet and comfort."

Meanwhile, Powerball's jackpot for Monday night's drawing is $340 million (the cash option is $178.2 million). The chance of hitting Powerball's top prize is a tad better than in Mega Millions: 1 in 292 million.