Here are the steps to take after you win a huge lottery!
9 - Pick the Lump Sum or Annuity
Sometimes a little bit of self discipline can go a long long ways.
That’s especially true for people who win the lottery.
I mean, let’s say you win a crap ton of money, like 200 million dollars….cue up
the Dr. Evil laugh.
But seriously, that qualifies as a life changing event.
And while it would be tempting to cash the winning ticket for for 200 million dollars,
well considerably less once the government takes their cut.
Depending on who you are, it’s wiser to take the annuity rather than a lump sum.
Why?
Basically, it’s to protect yourself…….from yourself.
Why do so many lottery winners go broke?
Why do so many professional athletes go broke?
Basically it’s just the fact that they spend more than they earned!
The cash isn’t forever.
Basically, if you can’t keep the same lifestyle after life-changing money, well, the annuity
is probably the best option to take.
It sounds like it’s an easy concept, live below your means, but it’s harder than it
sounds.
An annuity is basically like letting the government hold onto your winnings for a while and invest
it for you, without taxing the return on the said investment.
The annuity also continues AFTER you lie, assuming you pass on to the afterlife within
30 years of your winnings.
So it becomes a part of your estate, and once you die, your estate can take out a lump sum
so the IRS can only tax the estate once.
Of course, if you have insane self-discipline and you understand finance pretty well, then
yes, taking the lump sum makes much more sense because, let’s be for real, the numbers
don’t lie.
Or do what I’d do, take the lump sum, and don’t touch the principal and live off whatever
the principal makes!
8 - Hire a Team Mo money mo problems.
Biggie wasn’t lying!
You definitely will want to hire a team of professionals to help you manage that money.
You’ll basically want an accountant, a fiduciary, and an attorney.
A fiduciary is obligated to give you objective advice about how to go about managing your
new fortune.
They can also be the “bad guy” along with your attorney.
As Jason Kurland, an attorney who specializes in helping lotto winners explained to Vice
News, people will come out of the woodwork to give all sorts of quote, “great investments”
for you.
A series of bad investments can drain your winnings pretty quickly and it’s hard to
know when to say “no.”
You can simply let one person on your team be the bad guy who decides when or when not
to invest and be the one who says no.
Your attorney and tax accountant will help you set up and navigate all the legal hurdles
to protect your nest egg and minimize your taxes, because let’s face it, who wants
to do that on their own with that type of fortune when time is more valuable than money
at that point?
Every state has different lottery rules and tax laws, so you’ll definitely want to talk
to someone who can specifically analyze your situation and give you the best advice possible.
Hire that team, and make sure it’s not just your uncle Ted without any qualifications!
7 - Stay Anonymous The easiest way to save yourself from a lot
of trouble after winning a giant lottery is to stay as anonymous as possible.
Don’t tell anyone that you won the lottery!
First thing you’ll want to do is to set up a trust.
It’s a way to remain anonymous that way when people look up who won x lottery, they
just see the trust.
I mean think about it.
Let’s say you win hundreds of millions of dollars.
Then people find out.
Best case scenario, a bunch of your friends and family start hitting you up to borrow
money and it’s just really annoying.
Worst case scenario?
Shady business people constantly hound you for to invest in their horrific business ideas.
Online scammers consistently try to cheat you out of your money, or worse, people try
to blackmail you or even threaten to harm your family for ransom.
This all sounds crazy, but it’s all happened before.
First things first, sign the back of your ticket.
As lotto attorney Jason Kurland explains to Vice, “technically whoever hands the ticket
in is declared the winner.
If you sign the back of it, you secure that it’s yours.”
Okay, so there’s that.
Forbes contributor Robert Pagliarini, an expert on sudden wealth, recently wrote about something
called a “Claiming Trust.”
This means that as the lottery winner, you assign the ticket to a trust, which then claims
the prize and holds it for a short period of time.
You then set up what’s called a bridge trust, which ultimately transfers the money to you.
All this may sound like a lot of headache, but this “trust within a trust” method
shields winners from the public and other people you don’t want to know.
6 - Don’t Buy Anything….for a while Here’s where your self control and discipline
will REALLY be tested.
If you win the lottery, don’t make any major purchases that you wouldn’t normally make
for at least three months up to a year, and that time period really varies from person
to person.
Really, it’s probably just best to do a year.
You gotta get used to the money, and let that initial shock wear off.
It’ll take awhile for everything to get back to normal.
But if all of the sudden you start living this new fancy life, chock full of champagne,
limos, and crazy expensive clothes and cars, you’ll be setting yourself up for failure.
I’m not even mentioning what the money can do to your relationships, and how with a new
flash lifestyle, people start to look at you differently.
In other words, live your normal life for a while.
Keep your day job, stay in the same house, and don’t deviate too far from your normal
spending habits.
Sure, maybe you’ll splurge on a nice dinner a bit more often, but for the most part, the
more you maintain your usual routine, the better off you’ll be in the long run.
5 - Pay Off Debts If you have any debts, the first spending
you should do with the money is to start paying off all your debts if you have any.
Credit Card bills, student loans, etc.
Yep, even paying off your mortgage is smart, unless your interest rate is ridiculously
low and it’s lower than the return you’d earn in some other investment.
That’s another discussion really.
According to Forbes writer Deborah L Jacobs, paying off your debt is really the best investment
a person can possibly make, and that’s something I’d have to agree with.
She said quote, “When you’ve paid down a dollar of debt, that’s a dollar you no
longer owe.
When you invest a dollar, you can’t be sure whether it will grow or shrink.”
True!
4 - Make and Live on a Budget Generally speaking, making a budget and abiding
by it is a good practice to live by no matter how much money you have.
But when you suddenly win a whole bunch of money, it can be easy to think that the money
can just last forever, and not worry about a budget at all.
The truth is, no matter how much money you have, you’ll always have to manage it, and
you’ll always need to be smart with your finances.
By the way, you can totally spend some money on yourself and friends after the initial
waiting period is over.
It’s okay to take a vacation, buy a new car, enjoy a fancy dinner now and again.
The key is to figure out how you can make the money last a lifetime, maybe more, and
basically, let the money work for you.
Even with millions of dollars, it’s really easy to light it on fire and blow through
a few million in a very short time.
Setting, weekly, monthly and yearly boundaries will help you avoid the pitfalls of spending
too lavishly and burning through all of the money.
Like I said earlier, the safest bet is to not touch the principal for spending.
Just think, you’ve made it this far without spending crazy amounts of money, so why not
keep that going and save your newly acquired fortune?
3 - Make the right picks We’ve always been taught to invest our money.
Let our money work for us.
Let’s not forget, Warren Buffett made 99% of his money AFTER he turned 50, because of
the magic of compound interest on the hundreds of millions he already made.
However, you’ll want to avoid BAD investments.
Now what exactly constitutes a bad investment?
Hmmm, well if your friends suddenly start coming up with new business ideas after you
win the lottery, chances are, it’s a really bad investment.
In fact, most new businesses fail.
You gotta invest your money and let your nest egg grow, but you don’t need to swing for
the fences.
Just like baseball, focus on solid contact and you’ll hit a lot of singles and doubles
with some home runs mixed in.
Matthew Goff, a Houston based financial advisor, told Market Watch that lottery winners should
divest their fortunes after they set up an annuity and pay their taxes.
He recommends putting most of the money in a short term corporate bonds.
This alone can generate millions of dollars every year.
There’s also a short term municipal bond, that according to Goff, offers tax free incentives
and can generate additional hundreds of thousands of dollars every year.
Now I could go on and on with different ways of investing the money, but the right investment
depends on the investment goals of the individual.
You just gotta make sure you have someone who’s qualified helping you make the right
decisions so you can reach your financial goals.
2 - No New Friends/Practice Saying No If you happen to win the lottery one day,
you’ll notice a very odd trend.
You’ll suddenly have a lot of people who wanna be friends with you all of a sudden.
Now, it very well may be the case that they’re drawn to your winning personality.
However, more often than not, these people are after your money.
Just don’t be their friends.
CNBC reported in 2017 that lottery winners are far more likely to file for bankruptcy
within three to five years than everyone else.
One reason is that not only do new quote “friends” appear, but existing friends and family members
tend to ask for money pretty often as well.
And while it can be difficult to say “no” you’re gonna have to get used at it.
Remember that attorney Jason Kurland?
Like he said...let someone on your team be the bearer of bad news.
If you’re having a hard time saying no, simply defer all of those decisions to that
person and let them be the ones to turn your friends down.
After all, if someone only likes you for your money, are they really your friends?
And if you go broke you can’t help anyone...including yourself.
1 - Set up Asset Protection Strategies Even though I just went over practice saying
no, sometimes you’ll wanna say yes, but just know that the times you do say yes, you’ll
probably never see the money again, and just be okay with that.
Once you figure out who the most important people to you are, and who you actually wanna
help, you’ll want to set up some sort of long term asset protections plan.
We’ve already discussed annuities and blind trusts.
But you may also wanna reconsider your will, to ensure that whoever you picked to help
will be able to get some of your money once you pass on to the great beyond.
If you don’t even trust yourself, you can set up something called an irrevocable trust,
which turns control of the money over to the trust, which shields you from outside influences.
A great example of this would be an asset protection trust, which you regain control
of years later.
This insulates your money from creditors and regulations that could adversely affect your
money.
Here’s what’s next!