Lessons from the Powerball
On Jan. 14, 2016, it was announced that winners from three different states will share the largest Powerball jackpot ever – $1.6 billion.
After the winners finish celebrating, they will have an important choice to make: should they take the money in a lump sum or should they choose an annuity?
Mark Cuban, the billionaire owner of the Dallas Mavericks, was interviewed by a Dallas newspaper about what advice he would give to the winners, who will suddenly find themselves making decisions about a large sum of money. Cuban recommended the following:
- Hire a tax attorney.
- Don’t take the lump sum. You don’t want to blow it all in one spot.
- Tell all your friends and relatives no. They will ask. Tell them no.
- You don’t become a smart investor when you win the lottery. Don’t make investments.
Cuban is not alone with his recommendations. The New York Times published an article on Jan. 14, 2016 titled “Dear Powerball Winner: Take Our Advice and Take the Annuity.” The author’s reasons to take the annuity included:
- Significant tax advantages to the annuity
- Protection from yourself and others. Of course, the big advantage of the cash prize is flexibility, which is also what creates most problems.
Lessons from the Powerball
The Powerball presents a powerful parallel to the decisions faced by injury victims.
Similar to the Powerball winners, injury victims may suddenly be forced to make decisions about a significant amount of money. The same advice given by Mark Cuban and the New York Times applies to injury victims. Like Powerball winners, injury victims should:
- Seek tax advice
- Avoid taking the full amount of the settlement in a lump sum
- Use the tax advantages of annuities to their advantage
- Protect their proceeds from themselves and from others
However, unlike Powerball winners, injury victims must also consider how their recovery will impact their government benefits, how they will treat and live with their injuries, and a litany of other issues.
Comprehensive settlement planning ensures that all of these issues are taken care of and dealt with in an intelligent, well-thought-out manner. At Amicus, our goal is to be the plaintiff bar’s comprehensive, one-stop solution for all the legal and financial issues that arise at the time of settlement.
For a more detailed discussion of the issues that injury victims and their attorneys need to consider, read our article on planning options for settlement recipients and their attorneys.
