If you hold a winning Powerball ticket

Michael Boone, certified financial planner to winners

By Porter Anderson
CNN Career

(CNN) -- "Absolutely the first thing is to get it out of their checking account."

If you're one of the four winners of the weekend's $295 million Powerball jackpot -- or if you're dreaming that you were -- certified financial planner Michael Boone knows what could be in store.

"We're going to tie that money up," he says. "We may only have some one-month-maturity bonds in there, along with some longer-term bonds. But at least, it's 'not their money' anymore. And they can't spend it right away."

A mild disclaimer here -- CNN.com/Career neither endorses nor discourages the use of a financial planner if and when you make a big win. But we were interested in what someone who works with winners knows and does for a living.

And at MWBoone and Associates in Bellevue, just outside Seattle, Washington, Boone has seen a lot of money won fast -- and lost fast -- among clients who include not only lottery winners but also young professional athletes with big-bucks contracts.

QUICKVOTE If you won Powerball, would you use a financial planner to help you handle the jackpot? Yes. No question. Maybe. I'd have to see how I felt at the time. No. I'd handle it myself. View Results   VIDEO CNN's Skip Loescher experiences Powerball fever with ticket buyers (August 22) Play video (QuickTime, Real or Windows Media)   RESOURCES CNN Access: Powerball expert: 'I'd rather play blackjack'

"A good part of this work is understanding what kinds of things the people are going through when they receive that money. You need to make allowances for human nature."

And you need to make a certain allowance for what's going to be on the real check -- not the big fat one they hold up behind you for the cameras as they take your picture.

See the number on that check in your mind? -- Chop it in half.

"You're talking about a 39.6-percent federal tax bracket," Boone says. "Now, Washington has no state income tax. But in other states, plan to add about 7 percent more to cover that. Ballpark 40 percent for the feds, and then 7 percent for the state, and you're talking almost half of that money gone before the real check gets to you"

One of the biggest problems this may create, Boone points out, occurs when charitable solicitors come for you. "Any time your income is printed in the newspaper, you're going to hear from these groups." A local fund, for example, he says, will come to you saying, "This community has given you a lot over the years ... " You get the picture.

Although Boone says he's seen less boldness from church groups than from other charities, churches, he says, may ask you to "tithe," or give 10 percent of your winnings, and not realize that you're starting with about half the amount announced on news sites and in television and printed reports.

State lotteries will withhold huge amounts of taxes. "Still, they may underhold a bit," Boone says, "based on your personal situation and factors.

"Then you go out to dinner," he says. "I've seen this happen. The winner is at dinner with, say, 10 other people -- who are ordering 20-year-old Scotch. And when the bill comes, everybody puts their hands into their pockets and looks at the winner.

"High school friends you haven't heard from for a number of years call you up: 'I'm trying to get a business started. It would really, really be a big help to me -- I'm just looking for 50 grand to get me started, get me on my feet and I'll pay you back, give you 25 percent of the business.'

"And family members are always there. Mom and Dad expect a house. And I'm not saying they shouldn't have one, but yeah -- it's expected."

If the windfall falls on you

In 16 years in the business, Boone says he's seen trends that suggest the going figure is about right -- some two-thirds of cash-windfall winners are likely to blow through their money within a couple of years, some even ending up with less wealth than they started.

He's a graduate of the University of Puget Sound in Tacoma, Washington, the son of "generations of farmers," as he puts it. And Boone says a big win can usually be much better handled by older people than younger ones.

So you won! Now what? Some big-money winners use financial planners to guide them. Others opt not to. Daniel J. Mannen Jr. of American Express Financial Advisors offers these points an adviser may address. Lump sum: As it has happened, four winning tickets have been sold for last Saturday's Powerball drawing. If each ticket has one owner, each winner has the option of taking $2.9 million per year for 25 years, or a one-time cash distribution of $41 million. For the purposes of explanation, though, let's assume that one person won the entire Powerball jackpot. In a one-time cash distribution of some $160 million, you're getting about half the jackpot before taxes, but you have a larger initial sum to invest and spend. You can plan investments so you pay only the top tax rates in the year of your win. Annualized payments: On the current Powerball jackpot, you'd get the entire $295 million or so over a couple of decades of payments -- top tax bracket every year. If you win $295 million and take the money in annual payments but die two years later, the government doesn't calculate the inheritance as $15 million the year you die and each year thereafter -- instead, the tax is on the present $270 million inheritance and is due now. This means your heirs could face a 50-percent inheritance tax on $270 million they don't even yet have. Your heirs will also find themselves in the highest income-tax bracket for the $15 million they get each year. The government will garnish those annual distributions until the the estate tax is paid with interest. Careful estate planning can work around many pitfalls if you're aware of them. Other pros: In considering lump sum vs. annualized payments, you may want to talk not only with a certified financial planner (CFP) but also with a CPA (an accountant) and an estate tax attorney. Giving it away: Be aware of the implications of giving money to your favorite charity or relatives and friends. You may be incurring tax liabilities on gifts, particularly of more than $10,000. Consider such options as contributing to a new Section 529 college saving plan. Source: Daniel J. Mannen Jr., CFP, CRPC American Express Financial Advisors

"Older folks are less likely to blow through it, they know the value of a dollar. If somebody is, say, 50 or older, they've done some work for their own retirement, they've learned and developed money skills."

On the other hand, a younger winner can fall victim to a sad sequence of wasteful events. "One of the largest wins we've seen was a 19- or 20-year-old guy, went through it fairly rapidly. He wasn't in great financial shape when he won it. He wasn't in a job where he was making much money. He pretty much figured he could retire" on a $1.5 million windfall from the Washington lottery.

"But he was mistaken, after he went through a girlfriend or two who got new cars out of the deal, you know. It kind of disappears. Fortunately, we were able to get him to hold onto a decent chunk of it. That's supplementing his income at this time and has been for eight or nine years.

"He's now got about $400,000 and a paid-for house out of the deal."

There are three main parts of Boone's approach in attempting to help a client get the most out of a win.

First is that effort to "make people understand it's not their money." By that, Boone means getting the funds quickly into savings instruments and "out of the checkbook. Treasury bills. Something guaranteed safe and solid.

"The second thing we do is -- understanding human nature -- realize that they want to go out and live large a little bit. You know what? That's OK. They need to do that. So we'll free up $10,000, $20,000, even $50,000 for them to just go out, buy everybody drinks for a few nights.

"The good thing this might do is help people feel a little normal human regret. Maybe they want to buy a Ferrari. Well, there are worse investments. And maybe by letting them do that much, you can help them see how quickly some of it can go. The ones who have the worst time are the ones who say, 'I don't want to know' when you show them the balances.

"And the third part is the serious planning. Where are this person's values? The biggest risk in a windfall is that people will lose who they are, forget what they're all about, think they're someone they're not -- as if they have to change and drive around in Rolls-Royces.

"If on the other hand they want to make a donation to a church, we might try to set it up as a matching donation. 'We'll give a million dollars if you guys raise a million.' This is all part of getting to know the client and his values. It's a time when life gets crazy. It makes some people very uncomfortable to win a lot of money."

And as experienced an adviser as Boone is when it comes to large winnings, he's not a player. "Oh, I 'd be happy enough to receive those winnings," he says, laughing.

"But I don't play lotteries. I'm not a gambler."