1. Don’t forget to sign the ticket or report to the state.
It is sad, but research has shown that not signing a ticket or failing to report to the state are the simplest and most common errors to make. Many lottery winners never know they won. Can you imagine losing a lottery ticket? If that isn’t bad enough, imagine if you are one of the few instances where someone else takes your ticket and shows up to collect the prize. Fighting over true ownership of a lottery ticket is not a simple task. There have been many disputes over who the true owner of the lottery ticket was.
In some ways, lottery tickets are almost like the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds in hand. Lottery tickets expire at different times from state to state, but generally in 90 days to one year.
2. Don’t go brag about winning to everyone you know.
If you suddenly win millions of dollars, chances are pretty high that you will to want to brag about it. After all, how could you not? Where this is such a problem is that lottery winners announcing that they won before collecting the winnings are putting themselves literally in grave danger. Chances are high that anyone who has ever done anything for you now may come with their hands out asking for something.
Then there are the extremes. Have you heard of kidnap and ransom insurance before? Two lottery winners have even found themselves victims of murder. 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. There is just no need to alert everyone before you get your plans in place.
3. Don’t automatically decide to take the up-front cash.
Some lottery winners may choose to get an annuity payment over the course of their life. Most winners want all the cash up front, and they take a discounted amount in order to do so. Getting tens of millions of dollars at once (or well over $100 million) probably sounds better than getting a paycheck for the next 30 years or so. Again, keep in mind that close to 70% of those who gain instant wealth without earning it end up in hard times again.
Hiring a highly reputable and visible tax professional and a reputable financial advisor with long histories is a must here. The theme of “reputable and visible” will echo throughout here, but please hire those two people before you make the decision about a lump-sum or annuity option.
4. Don’t think that you are now the smartest money guy in the room.
Just because you become wealthy overnight, it’s a very good bet that you did not become the best person to manage your money and financial interests overnight. If you go from living on a few thousand a month or struggling from paycheck to paycheck, what are the odds 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 this new fortune. That might not include just buying stocks and bonds and letting it ride.
Chances are extremely high that 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. Don’t count your eggs before they hatch — this money is not at all tax-free, with the highest IRS tax bracket, and don’t forget about state and local income taxes either.
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? If you want a hint, consider this: If you answered yes to that question, then you probably did not bother playing the lottery in the first place.