What to do if you win the lottery

Winning the lottery is the impossible dream, yet it happens to thousands every year. Of course there are tax horror stories involving people who have won the lottery and have given, spent lavishly, and poorly invested more money than they were entitled to keep. Others have been sued, have lost money due to fraud or identity theft, or have contracted the spending disease.

Some have continued to gamble, but have armed themselves with unlimited creditcards or tabs at the Las Vegas casinos. There is actually no “curse” of the lottery, there is just a treacherous path for those winners who are unknowing, unprepared and unable to realize that a large infusion of cash might aggravate existing family dysfunction.

The first step for the lottery winner is to have a plan. There must be a good attorney and a meeting even before the ticket is claimed. Banking can be a huge ripoff, considering all of the convoluted financial “products” which will be thrown at the confused winner. A good banking, financial consumer affairs, or tax attorney can prevent a lottery check cashing disaster. The good attorneys prefer to keep their clients out of court and out of trouble.

Have a plan for the money: At least the following decisions should be made: how much to set aside and protect in order to insure a steady income. How much will go for housing? Is is better to set up a steady income for loved ones and friends or to give a one time gift? The wise counsel of a professional (one who is not solely interested in trying to sell “products”) will get a person off to a much better start than going it alone.

A “lock box” for taxes: Many lottery winners forget that a certain amount should be held in reserve to make sure that future income and property tax bills can be paid. Have all of the federal and state income taxes on the winnings been deducted from the prize check, or are there taxes owed? If one wins a lottery in January, for example, income on money that gets invested or put into savings will constitute additional taxable income. In deciding to buy that dream house, were annual property taxes calculated and considered? What charitable giving or reasonable investments will help to offset income taxes?

It is important to have a good attorney who can advise about wills, trusts, and estates. All wills, advance directives, deeds, divorce settlements, arrangements for child support, debt clearing, and other legal and estate issues must be adjusted, planned for, or set up as soon as possible.

Security: After winning a huge lottery, it is not smart to let the lottery officials or press broadcast your good fortune, your name and your address at the same time! All sorts of trouble will show up at your house! Lottery winners may have to deal with robberies, fake appeals for charity, kidnap attempts, and a host of other attacks by the desperate and greedy. It is best to keep everything quiet until you have some security around you and your loved ones! The most savvy individuals tell no one about their good fortune until their legal, financial, security, and other affairs are in order.

Once settled: The best advice is to do nothing for a few months. Many lottery winners barge out into massive life changing situations and find themselves very quickly lost, disappointed, and losing. It is perfectly fine to take some time to settle down emotionally and intellectually before making huge life changes.

No amount of suddenly acquired wealth is the answer for individuals and families who do not have good life plans, good counsel, and control over what is surely to be a demanding set of life changes. So taking some time to do it right will pay off even more in the future!