Lump sum or annual payment?

It's a basic choice for all lottery winners, and financial advisers say picking the best strategy can be complex.

But as this week's record Powerball payout showed, having that huge check all at once is nearly irresistible.

Since December 2009, the Florida lottery has paid out 148 jackpots to Lotto, Powerball or Mega Money winners. All but five took the lump sum.

It's the same all over the country, said Don McNay, a Kentucky consultant who specializes in advising lottery winners and people who gain sudden wealth because of personal injury claims.

"Ninety-eight percent of Powerball and Mega Millions winners take the lump sum,'' McNay said Thursday. "But I advise people to take the money over time, if you are 84 or 30.''

Why?

"At least 70 percent of winners run through the money in five years or less,'' McNay said, "and it doesn't make any difference whether they win $1 million or $100 million.''

People who amass wealth by selling a business or inheriting a fortune are less likely to lose it quickly because they have time to plan, he said. But he tells lottery winners, "Don't take the $100 million, take the $5 million a year. If you run through that the first year, you have 19 more chances to figure it out.''

Zephyrhills resident Gloria MacKenzie, 84, won the $590 million Powerball jackpot this week, which she is splitting equally with her son Scott by prior agreement.

Neither they nor their financial adviser would comment on why they took the lump sum payout, which came to about $185 million each before federal income taxes. The Florida lottery already withheld 25 percent for taxes, but the top bracket is now 39 percent, so the MacKenzies will likely owe more when they file their returns.

The Powerball's "annuity option'' would have paid them the full $590 million, but parceled out over 29 years.

Whether mother and son ultimately come out ahead depends on how they spend it and what kind of investment returns they earn, advisers said.

The lottery's annuity option is based on low, conservative interest rates, but it is also applied to a higher base because the lottery doesn't pay those initial federal taxes. If stocks, bonds and interest rates rise, then the lump sum winners may do better. If the market tanks, people with the annuity will be smiling.

People often take the lump sum because "there are a lot of big things they want to buy up front,'' said Helen Huntley of Holifield Huntley in St. Petersburg. "They want a new house and cars rather than spreading it equally over a lifetime.''

The lump sum may also work better for an 84-year-old, because of her life expectancy, Huntley said. Annuity payments would still go into her estate, but that could cause complications by dribbling in over such a long time. Whatever is left from a lump sum, "would probably be cleaner,'' Huntley said.

The annuity option might make more sense with smaller jackpots, said Ginger Snyder of 360 Wealth Management Group of Raymond James. Annual payments might fall in a lower tax bracket.

In any case, Snyder said, lottery winners should consult an estate planner and tax attorney before deciding how to accept the money. Among other things, trusts and corporations might maximize ways to share bounty with children and friends, both while the winner is alive and after death.

"There are a number of tricky things you can do with partnerships and trusts if you have a lot of money,'' Snyder said.

Wealthy people can now give up to $14,000 a year to anyone without notifying the IRS. Larger gifts must be reported but without any tax burden until the giver hits a lifetime total amount of $5.25 million in reported gifts.

Above that, the giver pays federal gift taxes, which run 40 percent right now, the same as inheritance taxes. The receiver pays nothing.

Snyder also recommended that people like MacKenzie seek counseling because their windfall carries challenges.

"This has changed her life,'' Snyder said. "This is going to be very tough and very emotional.''

Times researcher Carolyn Edds contributed to this report.