What To Do if You Hit the Lottery!
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Did you know you’re more likely to be struck by lightning than win the lottery? Despite these odds, most of us have probably taken a moment to dream about what we would do if we did, indeed, hit the big one.
But what would you really do? Beyond dreaming about the trips, big homes, new cars, parties, and lavish lifestyle, have you considered what your initial steps would be? With 70% of lottery winners being broke within seven years, it’s important to have a solid plan in place should such fortune come your way.
With this in mind, here’s some initial steps to follow in the event you are lucky enough to win the lottery.
Step 1 – Breathe and Keep Your Mouth Shut!
- In California, you have 180 days to claim your prize. With Mega Millions and Powerball, you have up to one year. So, don’t run off to the lottery office first thing the next morning to collect your winnings.
- And, don’t quit your job! Though it may seem tempting, now is not the time to attract publicity. Abruptly quitting your job is a sure-fire way to draw such unwanted attention. (ex. Goodfellas – don’t draw attention, Chappelle Show)
- Instead, minimize the number of people you tell, perhaps only your significant other. The more people who know about your fortune, including co-workers and children, the more likely it will become common knowledge resulting in more burden and pressure.
- So, let yourself calm down. Waiting to claim your prize allows ample time to plan for everything that comes next.
- Essentially, remain anonymous!
Step 2 – Secure Your Ticket
- Don’t lose it! If you don’t have the ticket, you’ll never be able to prove you are the rightful owner and, without a doubt, will regret it the rest of your life!
- It may sound outdated, but according to Forbes you should always sign the back of a winning lottery ticket. A lottery ticket is considered a bearer instrument, which means whoever signs the ticket can claim the winnings. So, if you were to lose an unsigned winning ticket, the person who finds it legally can claim the prize.
- Make several paper and digital copies of your ticket. Store the winning ticket in a personal, home lock box or, even better, a bank safe deposit box. Keep a digital copy in an encrypted cloud storage account and an external drive. (Dig a moat around your house, fill it with water and put some alligators in it!)
Step 3 – Put a Team of Professionals Together
- You’re going to need a lawyer, accountant, and financial advisor who have experience with large financial windfalls. Don’t wait! Do this immediately!
- Specifically, you will need:
- An estate planning attorney to assist with the formation of a trust, will, etc.
- Certified public accountant who helps wealthy individuals, which you now are, organize finances and guide you through what’s likely to be a very complicated annual tax preparation process. (No 1040-EZ or Turbo Tax)
- A financial advisor or advisors you trust and can talk with on an ongoing basis for all financial matters – paying off debt, developing an emergency fund, retirement (which is now in your immediate future), investments as well as accompanying diversification, college funding, charitable contributions, etc.
- You may even want to consider a tax attorney who specializes in helping clients minimize tax liability without running afoul with the IRS.
- In hiring these professionals, do not be afraid to interview multiple individuals before choosing who you want to partner with. Even if you have to pay by the hour for these professionals’ time do not be afraid to do so, because now you can afford it.
- Together, these individuals will assist you in submitting your ticket and claiming your prize.
Step 4 – Lump Sum or Annual Payout?
- This is something you and your team of professionals will decide. In fact, it will be one of your first decisions.
- So, do you take your winnings in one lump sum (usually around 60% of the total value) or do you have it paid out to you annually over a period of time?
- With a lump sum payout, you may be able to grow your winnings larger than what the annual payments would have been. Doing so, however, takes patience and restraint – two qualities not everyone has.
- By contrast, if you need some structural help to keep from overspending too quickly, an annual payout is a solid, responsible way to make sure you’ll continue to have income throughout your life.
- A lot of people wonder, “Well, what if I die?” In California, if a jackpot winner dies before receiving all annual installments, the balance of the prize will be paid to the winner’s estate.
As previously noted, the vast majority of lottery winners end up broke within seven years. A lack of planning at the beginning of their adventure is a primary reason for such failures. Don’t let this happen to you should be so lucky as to win the lottery. Follow this advice and enjoy the windfall in a way that will benefit you and your loved ones for many years to come. And remember, the best things in life are free – even dreaming of winning the lottery!