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Lottery winner! - Phil's Rambling Rants — LiveJournal
March 8th, 2007
07:16 pm

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Lottery winner!
Since I heard that the Mega Millions jackpot was $370M, I bought a ticket on Tuesday.  I know I didn't win all the marbles, because I heard on the news that the two winning tickets were sold in Georgia and New Jersey.  But I checked my numbers, and I matched the Powerball gold ball, so my ticket is worth $2.

The occasion has given me a chance to update my speculation on what I'd do if I won.  I've learned a little more about how the tax laws work, and (assuming what I've been told is right, which is always open to question -- even when the IRS themselves tells you!) the charitable contribution deduction is limited to half of gross income in a given year.  Also, I've been advised that it is no longer legally possible (if it ever was) for me to create a new charitable foundation, claiming the endowment money as a charitable deduction, and then letting the money out over time.  I would have to donate the money I wanted to deduct directly to already-existing charities in the year that I got it.  Since I want to donate the money to small organizations that would use the money directly for my idea of good, rather than to big established organizations that would use much of it for being large established organizations, disposing of millions of dollars in a single year would be rough.  So my current plan would be to take the 26-year payout.  Each year, my intention would be to max out the charitable deduction within the year.  The rest (after the first year, when I'd put away all the money I'd ever need for myself) I would try to use for worthwhile things, but I wouldn't be limited to tax-deductible worthwhile things, such as funding lobbyists for issues I care about or investing in small businesses which I approve of to give them the freedom to look beyond short-term profits.

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From:blur01
Date:March 9th, 2007 02:43 am (UTC)

My plan

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My plan has always been to take the lump sum disbursement of the pay out. I figure that I'd rather have the money earning interest for ME rather than letting they keep it. I dont think Im going to survive 26 more years so that goes into my plan as well.

I have no interest in letting anyone pressure me / beg me into making donations to any group for any reason. It isnt a selfish issue, its more than I really don't want to be bothered with it. I already despise the idea of someone gaining dozens of new friends when they become famous.

As to using the money? Its fairly simple. I have a list of friends and acquaintences who would immediately become debt free. With an amount of money that size, I see no reason why any of my friends need to be in debt. It would be a single one time fix. I waver back and forth on making it a no interest loan or making it a gift. Not sure which would be best in
the grand scheme of things.

Then I would build the compound.
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From:wouldyoueva
Date:March 9th, 2007 03:11 am (UTC)
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My sister, the tax lawyer, says if you win the big prize, always take the cash prize. She says the annuity they buy has a poor payout, and you'd do better to buy your own.

I'm with you. I'd want to do things with it that the IRS might not think are worthy charities like developing the self-cleaning house or giving every high school student a copy of my mother's favorite book, CATCHER IN THE RYE. (She used to battle the school board on a regular basis when they tried to ban it.)
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From:tigertoy
Date:March 9th, 2007 04:01 am (UTC)
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My sister, the tax lawyer, says if you win the big prize, always take the cash prize. She says the annuity they buy has a poor payout, and you'd do better to buy your own.

I don't buy this. The money you get if you take the cash is the same amount of money that goes into the annuity. The annuity may not be the best investment, but if you take the cash you have to pay tax up front, so you get to invest a whole lot less money in your better-than-the-annuity investment. And if your investments actually make any money, you get taxed again on the income. You either have to be planning to get lucky on very risky investments or assume that the annuity is a really horrible investment for it to make sense. A few years ago, interest rates were so low that the annuity was only something like a 1-2% return and the cash payout was almost as big as the nominal jackpot, but interest rates aren't that low today.

But these arguments are normally made assuming that the winner wants all the money for himself. I don't want it for myself; I want to give it away, in human-sized chunks, to small groups on the ground that I personally check out. If I took the lump sum, I would either have to donate big chunks of money to large organizations, or just accept the taxation. I simply could not give away $50M in one year the way I want to.
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