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If you win the Powerball tonight, it won't make you a billionaire, unless you are pretty far along already, but if you take the lump sum, after tax you will probably be close to half a billionaire. My inner child insisted that I buy a Powerball ticket Sunday night and the stupid little brat is convinced we are going to win , so I've been planning. A couple of things I have decided for sure. I'm taking the lump sum, because I think I can have more fun that way and the other thing is that I want to be anonymous. And I have figured out how. I'm drawing a little inspiration from Mark Zuckerberg.
LLC
Here is the drill. Thursday morning I will take my winning ticket and drive, very carefully, to my lawyer's office. He or she will form a Limited Liability Company which will have me as the sole owner, but the law firm as the managing member. The law firm will then go cash the ticket and open accounts. The accounts will be overseen by this little boutique accounting firm that does family office work. Finally, I'll have landed a decent account without having somebody else develop the lead for me.
The limited liability company will not save income tax or estate taxes. What it will do is provide a confidential vehicle to do all the whacky things that I want to do. Each one will be in a separate entity. There is the movie company Let Them Be Sea Captains LLC (Bonus points for any commenter who figures out what the first film will be). And then there are the strip malls. I really like them. The really dinky ones that don't have a really big anchor. That will be Greenstrips LLC and it will strive to have tenants who only sell things that are good for people. I have a hunch it will turn out to be not very sound and am capping that one at $50 million or so.
Since the LLC will be a major account that pays me very well to oversee its affairs, I'll have plausible cover to write a lot of $14,000 checks to a lot of my relatives and set up $70,000 529 plans for all the kiddies, while they have the impression that the ship that came in for me was kind of a PT Boat rather than an aircraft carrier. When it comes to charitable contributions , the LLC will write those checks.
Not A Tax Saving Vehicle
I spoke with attorney Howard Medwed of Burns and Levinson about the idea to see if he saw any flaws. He, of course, was thinking that I might have been trying to save transfer taxes, but that is not what I was about - just looking for the strong anonymity while maintaining control. Howard said that if he ever bought a lottery ticket, prior to the drawing he would send e-mails to his children and other natural objects of his bounty informing them that he had transferred an undivided interest in the ticket. Once he understood that I was just talking about anonymity, he thought it would work fine, since the lawyers would be sworn to secrecy.
Cut your expenses, boost your net worth and secure your financial future in a day.
Lottery Maybe Not Such A Great Idea
The reason Howard would never buy a lottery ticket himself is that he sees the lottery as a tax and since he spends a lot of energy trying to save taxes for his clients that it would be silly to pay a tax that he doesn't have to. You can find a lot of material on why the lottery is a really bad deal. This piece by John Oliver is probably one of the best.
That Facebook Kid
The inspiration for using a limited liability company as a management vehicle for my lottery winnings and to preserve anonymity comes from Mark Zuckerberg and Priscilla Chan, who established the Chan Zuckerberg Iniitiative LLC as a vehicle for their philanthropic activities. An LLC does not give you any immediate tax benefits. What it does is allow you, thanks to the check-the-box regulations to have a legal entity that is separate from you without creating another layer of taxation or other complications. A single member LLC is disregarded for income tax purposes. Everything the LLC does is as if you had done it yourself.
Does It Work?
A good question that Howard raised is whether a limited liability company could cash a Powerball ticket. While cautioning me that "This may vary from state to state", Christian Teja, Director of Communications for the Massachusetts State Lottery indicated that in Massachusetts a limited liability company can cash a ticket. I found that Powerball has a pretty complicated structure, so the rules can vary based on what state you bought the ticket in.
Not Original As It Turns Out
Honestly, I thought the idea up all by myself, but as it turns out, I'm not the first person to think of it. I found this story in the Washington Post - D.C. Man, 82 Wins Powerball but Chooses to Remain Anonymous.
Technically, the $79.6 million lump sum goes not to the man but to Rockson LLC, a limited liability company. Lottery officials said such a partnership permits the winner to protect his anonymity.
"He does not have to appear in documents," Wilmot said.
