Lottery-balls

What To Do When You Win The Lottery

Everyone dreams about hitting it big with the lottery–including millionaires.

The only time I ever bought a lottery ticket was when a multi-millionaire dragged me to a gas station after a lunch meeting.  He always bought tickets when the jackpot hit over $20 Million.
Lo and behold, the Mega Million Lottery jackpot for this week is the biggest in US history.  Right now, it’s sitting at $540 Million.  Winning this lottery will certainly change someone’s life and, more than likely, not for the better.

It’s tempting to think that a unexpected sum of money will bring happiness–but I know from experience that the reverse is often true.   I’ve met several lottery winners in my career, but sadly none of them had any of their winnings left.

Two of the winners won the lottery three times and four times respectively, (Yes, three and four times!)  and both are still working to support themselves.  Even with the prior experience of winning, they still repeated the same mistakes: spending too much, spending too soon, and overestimating how far a few millions will stretch.

For the man who won the lottery four times, the smallest pot was the last one. After losing everything from the first three wins, he chose annual payments and is currently working as a bus driver to supplement his income.

At least he kept his marriage intact.

If you win the lottery, everyone has suggestions on what to do first.

Get ready though, it’s not about the first day–its about the next 59.  You have 60 days to make some key decisions and choose between the lump sum or annual payment.

Day 1:

1.  Sign the ticket.  Make a copy and put it into a safety deposit box. Don’t tell anyone yet.

Day 2 through ???:

2.   Check your estate planning.  Do you have a will?  Do you have a trust?   If you don’t have both of those.  Stay in the house and make phone calls until it’s set up.   If you die in the State of California without a living trust, your estate will be subject to probate.

This means that you will pay income tax, estate tax, and probate costs.   The majority of that nice lottery jackpot will basically go to the government.

3.  Evaluate your current advisers:  Lawyer, CPA, and financial adviser.  Do they have the capability to handle your situation?  Will they be honest about their lack of ability?  Choose wisely or you will lose another big chunk in taxes to Uncle Sam.

Still don’t tell anyone that you’ve won.

4.  Get a good insurance agent and get started on protecting your jackpot from estate taxes.  Again, get a good one.

5.   After you’ve taken care of your trust and will, take the rest of the week off with your family.   Go somewhere remote and luxurious for a retreat.   Spend time to relax and talk with each other about love, dreams, hopes and expectations.

If you need more time, take it.  This retreat should be difficult because you need to dig deep and talk about tough things.  Talk about resentment and hurt feelings.  This is the gift that money will give you.  The opportunity to take time out and connect with the important people in your life.

This step is the most important one.  It’s the make or break part of your life.  You need to make sure that winning the lottery will not ruin your family.

6. Now you can tell people, and collect your money.

The last advice I have is to hold off buying anything big for two years.  This includes a massive house. You need to understand the cash flow from your jackpot first before you commit to anything.

© 2012 MoneyandRisk.com all rights reserved

12 comments

    1. Mitch,

      You brought up a key issue that few think about. The winner’s family would be immediate targets for kidnapping. I didn’t want to bring it up in the post since it was so depressing.

    2. You will not become a target, if you specify you do not want your win made public. Furthermore, you can really keep things quiet and only tell the few trusted people in your life, and that out of that group, you know can keep your shit private.

  1. I don’t ever play the lottery, so I guess my odds of winning are pretty low. I guess the biggest advice that people should follow is, “If someone wasn’t your friend before you won the lottery, why do you think they want to be your friend now?”

  2. Good steps to know in case I ever hit it big! Haha doubt I will though because I play rarely. It’s always amazing to me how the money tends to ruin people’s lives. Even when people just get a windfall unrelated to the lotto, they seem to burn through it like there’s no tomorrow.

  3. “The last advice I have is to hold off buying anything big for two years. This includes a massive house. You need to understand the cash flow from your jackpot first before you commit to anything.”

    It might also be worth asking yourself if you wanted this big purchase prior to the Lottery win as well. And if the answer’s no, ask yourself whether you really do want it, or if it’s just a status symbol.

    Me, I like to think that the first thing I’d do – besides panic – would be to figure out what sum of money could guarantee me financial security for the rest of my life, then bank it and leave it alone. That way, I’d always have something to fall back on if I got into trouble. And then I’d pay off my mortgage.

    But bowling alleys, private jets, diamond-encrusted toilets and all that? They don’t appeal to me now, so there’s no reason for splashing out on that kind of thing after a Lottery win.

    Winning the Lottery does have the potential to ruin your life. It doesn’t have to and it can be a wonderful thing, but making it a wonderful thing does require a lot of effort from the winner.

  4. If I ever won the lottery I’d just stick the entire thing into a savings account and live off the interest for the rest of my life. The most precious thing you can buy when you have all that money is time, so why not make it stretch as long as possible? Unfortunately most lottery winners try their best to deplete their winnings as fast as they can with risky investments, flashy car and gaudy mansions.

  5. People who play the lottery as an investment and hope to strike it rich
    Is in LaLa Land. Money got from not earn working hard for have no value
    Like you mention. The one who got it is mostly to spend it out of controll
    And by time they know they are back to square one “Broke”. If people
    Just know how to mange their money then they will build wealth slowly and
    Be rich without all the publicity. Can’t drop a seed in the ground tonight and
    Expect fruit the next morning. Money takes time to grow so it have a strong foundation. The lottery is a tax on the poor, lazy, desperate, and greedy people.

  6. The rule is if you can’t manage $10.00 dollars, how are you going to manage a large sum of money? Seriously, if you are the kind of person who lives paycheck to paycheck and don’t know how to manage your money. Chances are your going to be one of those people with the tragic ending.

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