What to do After Winning the Lottery
July 17th was National Lottery Day. So, did you play? Let’s imagine you winning the lottery! Congratulations! What’s the first thing you should do?
If your answer was, post it on Facebook, you would be wrong. The best thing to do is to remain anonymous, if possible. Currently only five states allow winners to remain anonymous (unfortunately Michigan is not one of them), but there are ways to claim the money somewhat privately.
Winning the Lottery, what is next?
Sign the ticket
Lottery tickets are very much “finders, keepers.” Whoever holds the ticket is the winner. Another suggestion is to take a photo and video of yourself with the ticket, so that you can prove that you are the rightful winner.
Safeguard the ticket
You’re rich now, so you can afford a safety deposit box! You might want to also make a photocopy of the ticket, and only work with that, keeping the original in a safe place.
Advisors, assemble!
You should speak to and choose a tax advisor, preferably a CPA or a tax attorney, or both. You may also need an investment advisor, especially if you are not used to handling large sums of money or don’t have one already, and estate attorney/family planning attorney who can draft trusts, etc. I talk more about this below. How do you find one of these people? Ask your friends for recommendations or go to the office of an established and reputable investment practice (Like, Stephens Wealth Management Group) and ask to speak with someone. They can give you recommendations for lawyers and accountants and help you make the right investment choices. Some of the questions you’ll need to work out with your advisor team include:
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- Claiming the winnings. Sometimes you can set-up a trust, donate the lottery ticket to the trust, and then the trustee can then claim the winnings on behalf of the trust, and your name can be kept out of the public eye.
- Whether to take the lump sum or the annuity payments (typically an annual payment over 30 years.)
- Many past lottery winners have been tripped up by the amount of tax payments due since they are not used to paying large tax amounts.
- Investment choices.
Make a publicity plan
Everyone will probably get to know your name. Determine if you want to be your own spokesperson or if you want to have someone else handle the numerous interview requests. You may want to consider changing your address to a post office box, and changing your phone number to a new, unlisted one. You are very likely to get calls from all kinds of unscrupulous people looking for a handout. Everyone will want to contact you with “business opportunities,” charitable donation requests, and for loans.
Don’t quit your day job
Or buy the big mansion or give a bunch of money to charity. You may absolutely be able to do these things eventually, but for the short-term, don’t make any quick decisions, especially without talking to your team of advisors.
Finally, celebrate!
You’ve earned it, especially if you’ve gone through the steps to talk to professionals and set yourself up for the best future possible.
NOW, here’s the most important thing: some scary statistics.
70% of all lottery winners end up going broke and filing for bankruptcy. And lottery winners are more likely to declare bankruptcy than the average American. Why? Because typically those who don’t know how to handle the influx of money end up losing it by spending too much. This is where a financial advisor can really provide you with some guidance. So if you do win the lottery, please give me a call.
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