Becoming an overnight millionaire thanks to one row of numbers could certainly make life a lot better, right?
What would you do if you won the lottery? We bet you’ve thought about it a few times. Well, we want to let you in on a secret. There are a few things winners do whether they want to or not, and that’s what we’re discussing today.
It’s a common misconception that the more you win in the lottery, the more likely you are to blow it.
According to the National Endowment of Financial Education, research doesn’t back up the anecdote about losing your windfall within a few years. Sure, there are plenty of examples of the “curse of the lottery,” like the Kentucky winner who lost his $21 million prize within 5 years and the West Virginia winner whose daughter and granddaughter both died of overdoses after he won over $300 million. But they’re unique cases.
In fact, research shows that lottery winners are more likely to retain their wealth over a decade after scooping a jackpot.
The minute your nearest and dearest find out you’ve won, you’re going to hear sob stories. There’ll be tales of late tax payments, houses being repossessed and all sorts of other hardships that’ll leave you questioning who your friends are and what their intentions may really be.
While you’re more likely to be careful with your cash, chances are you’re going to splash at least some of it. From mansions to holidays, you’ll find yourself dishing out the dough on things you’ve only ever dreamed about.
Level-headed winners get together a team of professionals to help safeguard their winnings. You’re dealing with a huge amount of wealth, probably for the first time in your life, so you need experienced pros on your side.
The decisions you make even before you claim your windfall can affect just how much of the pot you receive. The first thing you’ll find yourself doing is calling a lawyer who has represented lottery winners. You’ll want someone who’s familiar with working within the legal framework where the lottery ticket was purchased since lottery win regulations tend to differ from one jurisdiction to the next.
You’ll also find yourself turning to tax advisers, financial planners and accountants. You’ll find yourself in intense meetings with decisions to make.
Based on your circumstances, the amount of your prize, where you live and the lottery itself, your team will advise you whether you go and get your prize yourself or let them do it for you. They may suggest creating a legal entity so you can remain anonymous. They’ll even advise on how to proceed with taxes.
When you win first prize in Mega Millions or a jackpot for playing Powerball, you get to choose between two ways to receive your windfall. You can either decide to receive annuity payments of the jackpot over the next few decades, or you can opt for a one-time lump-sum cash payment, which is usually a smaller amount than the advertised prize.
Most lottery winners decide on the cash options, but both options have their pros and cons. The amount of money you will actually have at your disposal to invest and spend, how much you’ll need to pay in taxes now and later and the value of the estate you will have the chance to leave behind all depend on the way you take your lottery winnings.
It’s complicated, which is why one of the things you’ll do whether you want to or not is work with the right professionals to map the way forward for a safe and secure future.