Winning the Powerball Jackpot or The Mega Millions Jackpot adds you to a highly exclusive club that only adds a few people each year. It’s more likely to be killed by a vending machine, have identical quadruplets, or become President of the United States than to get a big lottery win.
Being such a rare experience means there aren’t too many “how-to” guides for jackpot winners.
However, there have been enough lottery winners now that we have a good idea of what you should do first. Right at the top of practically every list is hiring a team of financial advisers and experts to help you and your family members handle the payout.
The exact build of a team can vary from person to person as every financial situation is different. However, these are the three types that should make up the core of every lottery winner’s economic team:
1. Lottery Lawyer
Lottery lawyers are essentially tax attorneys that specialize in working with lottery winners. A good lawyer is arguably the most critical part of your team and should be the first hire you make after winning your prize money.
Consulting with a lottery lawyer should be the second thing you do after winning (more on that later). There are a few reasons why getting legal advice before claiming your lottery prize winnings is very important.
One of the essential services a lottery lawyer provides is to help pay off your tax liability on your newfound wealth. The IRS typically withholds around 25% of your winnings in taxes before you get anything from your big win.
Unofutantely, that’s only the beginning of the wave of taxes that will come due after winning the lottery. A good lottery lawyer can help you navigate these confusing and overwhelming tax burdens while saving you some money.
Another vital service a lottery lawyer provides is they can help protect your privacy. It can be challenging for you to stay anonymous after you’ve won the lottery. Some states do their best to help protect your privacy.
Others have disclosure laws that require your name to be released publicly. Fortunately, these states have some workarounds, as you can claim the prize through a trust established by your lawyer. Doing so would allow you to keep your name out of the headlines.
The last significant benefit of hiring a lottery lawyer is they can help shield you from other people. One of the worst parts of winning the lottery is that you’ll have a big target on your back. It’s common for lottery winners to be subjected to scam attempts, frivolous lawsuits, and serious crimes.
The so-called “lottery curse” has ruined plenty of lives. A lottery lawyer might not be able to prevent the curse entirely, but they should be able to help minimize the damage.
Hiring a lottery lawyer is going to cost you some money. It can take a long time for a high-quality lottery lawyer to learn everything necessary to help you. That knowledge won’t come cheap, and you can expect to spend upwards of $100,000 in lawyers' fees during the first year.
The good news is that you likely won’t need the services of a lottery lawyer for a long time. You won’t need to keep your lawyer on retainer after the first year, which will help cut costs.
2. Accountant
Millions of Americans struggle to track their expenses properly or meet their tax obligations yearly. These problems don't suddenly disappear if you win the lottery and can even become even more challenging.
Reckless spending and complicated tax obligations are two leading causes for lottery winners to declare bankruptcy. Hiring a good accountant can help prevent either of these issues from taking away your winnings.
One of the most common misconceptions about winning the lottery is that you’ll never have to stick to a budget again. That kind of thinking will quickly drain your account and leave you penniless. It’s estimated that roughly 70% of lottery winners go broke within five years.
These odds are the same whether the prize is several hundred thousand or several hundred million. Tracking expenses is an accountant's primary focus, so they should have no trouble helping you create a reasonable budget.
Even if you believe you’ll be responsible for your money, you should still hire an accountant to help with your taxes. As mentioned earlier, the government will take an initial slice of your lottery winnings.
However, you’ll need to pay a lot of taxes in the future, especially if you take the annuity payment option. Understanding the various income, gains, property, estate, and investment taxes that come with being wealthy can be challenging. An accountant can help you fulfill your tax burdens and keep you out of trouble while saving money.
Hiring a certified public accountant (CPA) will cost you between $10,000 and $50,000 annually. That sounds like a lot of money for a bookkeeper but think of it as insurance against higher costs.
Going at it alone could result in overspending or failing to pay your taxes. If you end up getting audited by the IRS, you’re likely to pay much more than that in interest charges, late payment penalties, and lawyer fees. Sometimes in life, you have to spend money to save money.
3. Financial Advisor
Financial advisors and investment advisors are often confused with accountants, but the two are far from being the same. The easiest way to think about it is that an accountant will focus on your current finances. A financial advisor is more focused on your future finances. Employing the services of both can go a long way toward keeping you wealthy.
The key to staying rich is to grow your money as much as possible. Achieving this goal is often much easier said than done.
Stashing your lottery money in a savings account somewhere isn’t likely to even cover annual inflation costs. You’ll need to make serious moves to stay wealthy or get even richer.
Making intelligent investments is one of the most effective ways to grow your money. There’s no such thing as a sure thing, but a certified financial planner (CFP) will give you the best odds. These individuals are extensively trained in financial planning, have demonstrated ethical standards, continued their education, and passed strict certification requirements.
It’s important to note that hiring a financial advisor is the most difficult of the three on this list. A bad financial advisor can leave you in a world of misery.
Make sure that whoever you hire is trusted and will act in your best interests. It might even be a good idea to employ multiple financial advisors and determine the most lucrative ones.
The best financial advisors will naturally charge the highest amount of money. You might be able to find a good planner that charges on an hourly basis and limits the costs to a few thousand dollars each year.
For top-tier financial advisors, you’ll likely pay well over $100,000 annually. While that's a lot of money, you should consider it an investment. Paying a few hundred thousand dollars could net you a few extra million in returns.
What Else Should You Do After Winning the Lottery?
Hiring an ace team of financial experts is one of the most critical steps you can take after winning the lottery. The benefits that come from their services are well worth the money that they’ll cost.
In addition to building your financial team, these are a few other things that you’ll need to do:
Sign the Ticket
As mentioned earlier, hiring a lottery lawyer is the second thing you do after winning the lottery. The first thing that you should do is immediately sign the back of your ticket. Lottery tickets are considered bearer instruments, which means that whoever holds the ticket is the winner. If your winning ticket is lost or stolen, you might have lost your prize.
It’s essential that you immediately take steps to protect your ticket after you’ve won. The time between the lottery drawing and claiming the prize is highly volatile.
The smartest thing that you can do is write out your full name in print and include your signature on the back. The ticket could still be lost or stolen, but the person claiming the prize must explain why your name is on “their” ticket.
Taking multiple pictures and videos of you holding the ticket can also be a good idea. Sometimes, that could be enough for the lottery commission to accept your claim and release your winnings.
You should consider storing your ticket in a safe deposit along with information about where and when you bought it. Anything tangentially related to your lottery ticket should be regarded as extremely important.
Remove Your Digital Footprint
A good lottery lawyer will do everything they can to help you stay anonymous when collecting your lottery winnings. However, even the best lawyers can’t protect you from the internet.
News will eventually spread about your incredible luck, and you can expect a ton of strange friend requests on social media, phone calls from long-lost “relatives,” and in-person visits from “old friends” looking to reconnect and become your beneficiaries.
Just about everyone would love to get a piece of your lottery winnings. The vast majority won’t make any effort for your money, but there can be scary people who do.
There’s no telling what a desperate person might try if they think it can make them rich. As a lottery winner, your safety won’t be guaranteed, and you’ll need to take steps to protect yourself.
Deleting your social media, changing your phone number, and using a P.O. box is the best way to avoid these encounters. It might seem like a sacrifice, but your safety can be at risk if you don’t.
Performing these tasks doesn’t mean that you have to live alone and isolated in the woods. You’ll still be able to share the wealth with the people that you want to. It’s just that strangers and undesirable people will have a more challenging time finding your personal information.
Pay Off Your Debt
It’s practically guaranteed that you have racked up some debt. It’s virtually impossible to get through life without needing a mortgage, car loan, credit card, or student loan. Winning the lottery will probably mean that you never need these things again.
However, covering your debts as soon as possible is essential with one lump sum. Debt can quickly compound thanks to interest. The sooner you pay off your debt, the less money you’ll spend on annual payments.
It’s estimated that the average American has a little over $90,000 in debt. You should take the opportunity to free yourself from the chains of your debt. The mansions, fancy cars, luxury jewelry, and exotic vacations can wait until you clear your debt.
It’s wise to pay off your debt, even if it means spending all your lottery winnings. It might not be how you dreamed you’d spend your money, but there’s nothing more liberating than being debt free.
Protect Yourself by Hiring the Right Team
Winning the lottery can feel like you have an endless supply of cash, especially if you were lucky enough to win a record-setting jackpot. Even though the winnings might surpass your wildest dreams, the money is finite. Without proper care, you could lose everything within less than six months and be in an even worse position financially than before you won.
The best way to avoid this fate is to hire a team of financial experts. Consulting with lottery lawyers, accountants, and financial advisors should be at the top of your “to-do” list. All the wild dreams you imagined before winning the lottery will have to come later.
The priority should be surrounding yourself with experts to ensure that you can adequately fund these dreams. Otherwise, you could wind up right back where you started.
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