My sister and I know exactly what we’re going to do with our lottery winnings.
Well, kind of, when and if we ever win. We’ve been working on this for years, and the discussion this weekend was representative of all the issues we address.
As I often do on the drive south to spend time with her, I stopped for gas in the tiny town of Estancia, New Mexico, which is about 12 miles from where she lives. There I bought a $2.00 Powerball ticket for a chance to win about $50 million.
Of course we know about all the winners whose lives have been destroyed by the failure to deal wisely with sudden wealth. The stories seem to recommend that winners change names and move to a foreign country. However, Kate and I figure that we are smart enough to think our way through this. As we began to prepare food for our dinner party, the lottery conversation became very animated. To clarify the discussion below, I need to explain at the outset that Ann is our older sister, who lives in California, and Biggy is our brother in Texas. Bluenergy is a small wind turbine start-up in which I have invested.
E. OK. I bought the ticket, so if I win and you give me a dollar, we’ll split it. Do we want to take it all in cash or in an annuity?
K: An annuity might keep at bay all the people who would want to get money from us, but maybe we don’t get the whole amount if we die. We might want to take the cash, but that would be only about $31.5 million.
K: The annuity is worth $50 million. If you take cash, you get less.
K: Still I think we should take the cash but get Ann to serve as a front.
E: Can we trust her?
K: I think so, even though money does funny things to people. And here’s what I want to do with my half. I want to take $2 million for myself and give Ann and Biggy $2 million each, and I’ll give the rest to you so that you can invest it in some socially responsible enterprise.
E: Hmm. But that makes you look good and me look selfish. Maybe I need to give them $2 million each too.
K: What about me?
E: OK, $2 million extra for you too. Do you think that Ann will be willing to put up with being badgered for $4 million? After all, her name and picture will be in the paper.
K: Well, maybe we can negotiate. I hope Biggy doesn’t feel left out, though.
E: Let’s talk about what I should do with the balance. How much tax am I going to have to pay?
K: About $12 million on the whole amount, but then we’ll have to pay tax on what you give us.
E: So I should increase that amount so that you come out with a clear $4 million or whatever. How much am I giving you?
K: Listen, Ellen, the first thing we have to do when we win is hire an accountant. Let’s not worry about the tax right now. Let’s just say you give $4 million to each of us and keep $4 million for yourself, plus the balance, which would be about $15 million–before taxes. You would end up with $3 million extra after taxes.
E: That’s all?
K: It’s enough to do a few things with. Maybe you could create jobs by putting more money into Bluenergy.
E: Well, if I give them what they need, I’m not going to want to just turn over the money. I’ll want to be involved to see how it’s being used and participate in strategy, you know. I’d need to get an office and go to all the meetings and stuff. I wouldn’t have time for my writing. It would ruin my life. Maybe I should focus on St. Catherine’s School—you know, turning it into a school to prepare young women for leadership in the world.
K: You won’t have nearly enough money for that, and it would also take up all your time.
E: Well, what would you do?
K: I’ve thought about passing out gift cards with store credit for Estancia so that the economy would perk up.
E: Who gets them, though, and how could you be sure they wouldn’t work out a deal with the store owner to just get cash to buy tattoos or alcohol or something?
K: True. Maybe we could give grants to people so that they would fix up and maintain their homes.
E: So you’re going to start patrolling the neighborhoods?
K: OK, what about your friends–that couple you’re worried about who can’t pay their mortgage? Why don’t you pay it off for them so they don’t go into foreclosure?
E: Well, they got into this mess because they’re profligate spenders. If I did that, they’d probably take out a home equity loan and go shopping.
K: Wouldn’t you feel guilty about not helping, though?
E: I’m a reformed codependent, so no. Maybe I’ll hide the $4 million and live the same way I do now so that nobody knows. You take the rest.
K: Maybe we should take the annuity after all. It’s probably an amount that wouldn’t make us obnoxious.
E: But what about Ann and Biggy? We would have to live with the knowledge that we didn’t give them $4 million each.
K: Well, we could always help them out if they needed it. And besides, we haven’t come up with the right plan yet, so the Universe is probably going to give the money to somebody else.
E: Yeah, but I still think we could do a lot of good with the $50 million.
K: No, like I told you, it would be only about $19 million after taxes.
E: Oh, right. That’s not much. Maybe we’ll win more later.