by Michael Haltman
Hitting the lottery is the dream of anyone who plays but, if you happen to do it, what steps should you take immediately after?
We all have visions in our minds of what we would do with the winnings from an ordinary lottery jackpot (if such a thing exists) let alone a prize of $1.6 billion or more!
Buying a new home, taking a vacation, paying off debt and philanthropy are a few of them, but the reality is that coming into a large sum of money requires thought and planning.
Here is an idea of what you should not do when you win and what you should consider doing…
What You Should NOT DO If You Win The Jackpot!
What You Should Consider Doing If You Hit The Jackpot
From Today.com, a 9-Step Plan…
1. Sign the ticket and put it in a secure place.
Kathleen Jacob, public affairs specialist at the North Carolina Education Lottery, told TODAY:
“The first thing a player will want to do is sign the back of the winning ticket . It establishes ownership and the ticket must be signed to claim the prize. Of course, the player will want to keep the ticket in a secure place until then.”
2. Don’t accept the prize money right away.
No matter how excited you are to deposit that huge check into your bank account, Jacob suggests holding out as long as possible.
She said:
“One of the biggest things we urge players to do is to take their time. Prize claim policies may vary in each state, but here in North Carolina players have 180 days to claim their prize. This will give a player time to make some very important decisions, like what they want to do with the money and how they think it will change their life.”
3. Hire a team of professionals to manage your money.
With hundreds of millions of dollars it might seem like you can just throw money at any problem, but it doesn’t exactly work that way. The good news is you’ll have plenty of cash to hire a slew of experts to manage everything from your finances and legal issues to personal relationships.
Ric Edelman, chairman and chief executive officer of Edelman Financial Services, told us:
“Get an estate attorney to help you with structuring and protecting your assets. Also, get a financial planner and make no financial decision without that person’s guidance. Use that person as a buffer with all those who ask you for money – this will help insulate you and protect your relationships.”
4. Stay quiet and leave town for a while.
We wouldn’t blame you for wanting to shout from the rooftops that you’re a multimillionaire, but it’s best to keep quiet.
Laura Adams, author of “Money Girl’s Smart Moves to Grow Rich,” told TODAY:
“Other than a spouse or life partner, I wouldn’t tell anyone about your good fortune until after you’ve created a solid plan with the professionals. Well-meaning friends and family may not offer you the best financial advice.”
Erica Sandberg, personal finance expert and author of “Expecting Money: the Essential Financial Plan for New and Growing Families,” told us:
“Take a vacation. Get out. Go to Bora Bora for a month. Disappearing for a while means you won’t have strangers and family members hounding you for money. It gives you a chance to settle yourself. When people get a huge windfall it could take people up to a year to fully adjust to this new lifestyle.”
5. Don’t hand out cash to family and friends.
Having a lot of money means you can help a lot of people, but that doesn’t mean you can help everyone – nor should you.
William R. Patterson, chairman and CEO of the Baron Solution Group, advised us:
“Don’t feel obligated to bail out, reward, loan or give out lumps sums of cash to friends and family members. It may seem like harsh advice, but this is one of the fastest ways to lose your money. Talk with your financial advisers about strategies and vehicles, such as trusts, that can allow you to help others and also preserve your wealth. Additionally, cash and other gifts can have significant tax consequences.”
6. Don’t forget about all those taxes.
Even though the jackpot is $800 million, that doesn’t mean you’ll walk away with that amount. More than half will likely go to taxes immediately. And it doesn’t end there.
Sandberg said:
“It sounds boring, but planning for taxes is very important. The inclination is to not plan for taxes and not anticipate them. If you have investment income you’ll have to pay taxes each year. If you walk away with $500 million, it’s going into some sort of investment account that will earn money. All of those earnings are taxable.”
7. Set a budget.
How could you blow through $400 million, right? Wrong. Even with a huge sum of money, you still have to set a budget.
Edelman said:
“Realize it’s not a bottomless pit of money. Don’t spend wildly in the belief that it’ll last forever. A financial adviser can tell you how much income you can receive monthly from your winnings – you need to live on that amount or less.” Sandberg agreed, saying, “Set a budget, but also allow yourself those dream purchases. It’s a balance.”
8. Donate to charity.
Do some good with your money! Sandberg said:
“Identifying some organizations you want to donate to will help counteract any feelings of guilt and will also help with your taxes. You’re going to have to set boundaries early though and stick to them as much as possible. You can’t help every sick person out there, so set aside a certain percentage of your money that will go to a selection of organizations.”
9. Hire a therapist.
Along with your team of professionals helping you manage your money, you should also consider having a therapist to help you manage all the emotions that come with winning the lottery.
Sandberg said:
“A therapist should probably be your second call after telling your closest family members. People who do have a huge windfall can’t anticipate all of the emotions they’ll feel. It’s quite a massive pill to swallow. It’s not as joyful as people expect. Expect that you’re emotions will run all over the place. It could be terror, lack of deserving, the pressure that your friends, family and strangers might put you under. Find someone who can help you manage the emotional response.”
Michael Haltman is President of Hallmark Abstract Service in New York. He can be reached at [email protected].
