Here are the steps to take after you win a huge lottery!
9 - The Big Decision Sometimes a little bit of self discipline
can go a long long way. That’s especially true for people who win the lottery. I mean, let’s say you
win a lot of money, such as 100 million dollars. That easily qualifies as a life changing event.
Depending on who you are, it’s wiser to take the annuity rather
than a lump sum. Why? What’s the reason? Basically, it’s to protect yourself…….from
yourself. Why do so many lottery winners go broke? And why do so many professional
athletes go broke despite getting paid millions? It’s the simple fact that they spend more money
than they bring in, and they believe their cash flow will continue. If someone can’t control
your spending after life-changing money, the annuity is the best option to take. It
sounds like it’s an easy concept to live below your means, but it’s hard for so many people.
An annuity is basically letting the government hold onto your winnings for a while. They invest
it for you. But one good thing is, they don’t tax the return on the investment. The annuity also
continues AFTER you die, if someone dies within 30 years of their winnings. So it becomes a part of
their estate. And the 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, take the lump sum. The lump sum makes much more sense if we’re only looking
at the numbers and don’t take human nature into account. Or do what we’d do, take the lump sum,
and don’t touch the principal and live off only whatever the principal returns!
8 - Stay Anonymous The easiest way to save yourself
from a lot of trouble after winning a giant lottery is to tell as few people as possible.
If you’re able to, don’t tell anyone that you won the lottery! If you live in a state that
allows anonymous winners, you can set up a trust or a company. It’s a way to remain anonymous that
way when people look up who won which lottery, they’ll just see the trust or company name.
There’s no long term upside to telling people you won the lottery. Let’s say you win a hundred
million dollars in the lottery. Then people find out. There’s really no upside that people know
that you’re rich. It means a bunch of people you don’t know very well start asking for
money for business investments. The worst case scenario is online scammers consistently try
to steal your money. Or even worse, people try to blackmail you for ransom. This all
sounds crazy, but it’s all happened before. But first things first, sign the back of your
ticket. Technically whoever hands the ticket in is declared the winner. If you sign the back of
the ticket, you secure that the ticket is yours. Forbes contributor Robert Pagliarini, an expert
on sudden wealth, wrote about something called a “Claiming Trust.” This means that as a lottery
winner, you can assign the winning ticket to a trust. A representative for the trust
can claim the prize and the trust holds the money 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 encounter.
7 - Resist the Urge 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 a while. You have to get used to having
that money first! The length that’s right could be anywhere from three months up to a year. The time
period really varies from person to person. It’s probably just best to do a year. You have to let
the initial shock wear off. It’ll take awhile for your brain to get back to normal psychologically.
If all of the sudden you start living a brand new fancy life, it just sets the winner up for
failure. Then there’s the whole issue of how a bunch of money does to relationships. People start
to look at and treat the people differently that they decide aren’t the same as them
In other words, we’d want to live our 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. Maybe
splurge on a nice dinner here and there. But for the most part, the more you maintain your usual
routine, the better off you’d be in the long run. 5 - Debt Free
If you have any debt, the first spending you should do with the money is to start paying
off all your debts. Credit card bills, student loans, and yep, even paying off your mortgage.
Some people advocate not paying a mortgage off if your interest rate is low because it’s
lower than the return you’d earn in another investment. But 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 we 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’ll grow or shrink.” These are true statements!
5 - The Help Biggie wasn’t lying when he
said the more money you get the more problems you have. You definitely will want to have a good team
of professionals to help with all the things associated with a lottery win. You’d want an
accountant, a fiduciary, and an attorney. A fiduciary is obligated to give you
objective advice about how to go about managing your money. 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. The ironic thing is, Kurland ended up stealing money from his
clients! Find out all about it in this video! A series of bad investments can drain lottery
winnings pretty quickly. It’s simply hard to say “no” to people. 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. Let’s face it, who wants to do these things 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 in your state who can specifically analyze your situation.
Hire that team, and make sure it’s not just some random uncle without any qualifications!
4 - The Budget Generally speaking, making a budget and keeping to
it is an essential practice to live by no matter how much money someone has. When you suddenly win
a whole bunch of money, it can be easy to think that the money can last forever. The truth is, no
matter how much money we have, we always have to manage our money and be smart with our finances.
Even with millions of dollars, it’s really easy to light it on fire and blow through a few million
dollars in a very short time. We’ve seen it time after time! Setting, weekly, monthly and yearly
boundaries will help us avoid the pitfalls of spending too lavishly like other lottery winners.
3 - 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. Why? It’s because of the magic of compound interest on the
hundreds of millions of dollars he already made. However, you’ll want to avoid BAD investments.
Now what exactly constitutes a bad investment? If your friends suddenly start coming up with
new business ideas after you win the lottery, chances are, it’s a really bad investment. The
simple fact is that most new businesses fail. You gotta invest your money and let your nest
egg grow, but we don’t need to swing for the fences when it comes to investments. No matter
how great of an idea something is, there’s no need to put everything in risky investments.
Matthew Goff, a Houston based financial advisor, recommends that big lottery winners should divest
their fortunes after they set up an annuity and pay their taxes. He recommends putting
most of the money in 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.
We 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 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. However, more often than not, these people are after your money. Just
don’t be their friends. You don’t want to end up like Jane Park and be miserable with millions of
dollars. She won the lottery as a teenager and didn’t like all the attention she got!
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 to it.
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 - Asset Protection Strategies Even though we just went over the practice
saying no, sometimes we’ll wanna say yes! But we need to accept that the times that we 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 is in your will can get some of the lottery money if you do die.
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!