Is the lottery the new American dream? Imagine becoming vastly wealthy overnight. Being a winner of a multimillion dollar lottery certainly will be a life-changing event for almost every single lottery winner. But what about when the prize is an astronomical sum of $100 million, $200 million or $300 million? Various Powerball and state lotteries have reached vast sums, and lotteries elsewhere have as well.
Future Powerball and state lottery ticket winners will become incredibly wealthy in an instant. Imagine being Joe Somebody and turning into Sir Joe the Magnificent overnight. Now imagine the unthinkable, where Sir Joe becomes Joe the Village Idiot in a very short time. Supposedly most lottery winners end up broke again. That just doesn’t seem right at all.
There were two huge year-end lotteries set up. One lottery is a $300 million Powerball drawing set for Wednesday, December 30, 2015, and the other was a $117 million Mega Millions lottery set for Tuesday, December 29, 2015.
24/7 Wall St. wants its readers, particularly those few who are lucky enough to win the lottery, to avoid some of the simple and complex mistakes that have taken other lottery winners into bankruptcy. Some lottery winners have even died.
24/7 Wall St. has decided to offer 12 important things not to do if you are a lottery winner. We have looked around at many research papers and other articles on the matter about those who land in instant riches against all odds. Doesn’t it seem cruel to imagine that many lottery winners become losers? There is a saying that newly wealthy people need to commit to memory: you should only have to get rich once. The reality is that some people just cannot help themselves in avoiding the pitfalls of instant wealth.
2015 may not have broken the record books on the highest lottery winnings in America. Still, there was a $310 million winner from the Powerball lottery in Michigan. In February of 2015, the Powerball drawing with a $564.1 million jackpot there were three different winners who got to split this top prize. New York’s March lottery drawing brought a jackpot worth $136 million. There have been other U.S. lotteries in years past with jackpots north of $500 million, and as mentioned a year-end lottery is up for grabs with a Powerball jackpot of $300 million and a Mega Millions jackpot of $117 million.
While many lists explain what you should do if you win, it is surprising how few actual warnings are out there that can be used a scare-tactic guide that makes lottery winners do the right thing. Did you know that you might become a marked target if you are a lotto winner? Some people find instant enemies, and some people become their own worst enemy. It might have been very hard to spend $30 million in 30 days in “Brewster’s Millions” during the mid-1980s, but spending $10 million, $50 million or even $100 million can now be done faster than you can imagine. Some people now could even manage to spend that much just in a single day or two.
Some points about what to do, or not do, may overlap or seem redundant. The problem is that there are many pitfalls that snag lottery winners who become vastly wealthy overnight or those who find themselves incredibly wealthy in a very short period. This list of tasks also has many lessons for those who win big legal judgments, who unexpectedly inherit millions of dollars and who get sudden windfalls of cash from a business deal or a business sale.
Here are 12 things not to do if you win the lottery … or 13 things if the runner-up counts!
Forget to sign a ticket, or forget to report it to the state. After doing some research, we find this is apparently the simplest and easiest error to make. Can you imagine losing a lottery ticket? Then imagine what can happen if someone else snags your ticket and shows up to collect the prize. Fighting over this is no simple task, and disputes have arisen over who owns what ticket. In a way, lottery tickets are almost considered the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds. Lottery tickets expire at different times from state to state, but they generally expire in 90 days to one year.
Tell everyone you know. If you win millions of dollars, chances are pretty high that you will to want to brag about it and share some of your new joy. How could you not? The problem is that telling everyone you know before you collect your winning puts you in danger, and in more ways that just one. Everyone who has ever done anything for you now may come with their hands out asking for something, or worse. You probably have heard of kidnap and ransom insurance before. One lottery winner was even murdered. If you can manage it, and if your state allows it, try to remain anonymous for as long as humanly possible. How you became vastly wealthy will be found out in time anyway, but there is no need to alert everyone.
Automatically decide to take the up-front cash instead of the annuity. Getting tens of millions of dollars at once probably sounds better than getting a paycheck for the next 30 years or so. Now consider that close to 70% of lottery winners end up broke, many within a couple or few years. Let’s say that you can choose to get $172 million up front, or you can choose to receive a payout of $300 million slowly over the course of a lifetime. Most people choose the lump sum rather than the annuity payment as it is instant empire-making money. Go see a reputable and visible tax professional and a reputable investment advisor at a top money management firm with a widely recognized company name and a long corporate history. This theme of “reputable and visible” will echo throughout. Do this before you make the decision about a lump-sum or annuity option.
Think that you are the smartest person to manage your money and finances. If you go from living paycheck to paycheck, does it sound right that you will know the best things to invest in and the best tax and asset protection strategies? There are many ways to invest and protect that fortune, and that might not include just buying some stocks and bonds and letting it ride. Your drinking buddy might also not be the best choice as an advisor and expert. Having a solid and respectable team of advisors and managers in place will act as your buffer that protects your assets now and in the future. Also, don’t think that this money is a tax-free payment as you probably will have to pay the top tax bracket to the IRS and the highest state and local income taxes. Do you know how to protect your assets against all threats and know exactly how to protect your estate in case you die or become incapacitated? Here is a hint: If you answered yes, you probably did not bother playing the lottery.
24/7 Wall St.Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
