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LottoGopher wants to see you enjoy your winnings, so we’ve compiled some tips for winners to help with financial management. (Note that this overview should not be a substitution for professional financial and legal advice.)
Your decisions on what to do with the money may depend on how old you are, who you may wish share your winnings with, what types of investments you prefer, what type of purchases you will make immediately (a new car, big house, dream vacation), what tax strategies you can employ, what charities you want to contribute to, whether or not you plan to quit your job, if you plan to establish a trust, and many other factors.
Because there are so many things to consider, it is absolutely critical to take a time to think about all the choices. Sometimes the more you analyze, the more confused you become, and some of the variables that could be thought about might not even apply to you. The decision making process could be simple, or it could become a complicated procedure. Here are a few tips...
You are probably excited to get your hands on all that cash. Don't collect right away – get your support system in place. Temper your euphoria because your life is going to change in a drastic way. Smart winners will take a few weeks before collecting their lottery prize because they are busy getting legal and accounting advice first.
Make sure you know the deadline. Most lotteries have deadline to turn in your winning lottery ticket before it expires. Once you’ve arrived at the lottery headquarters, they will check your ticket carefully to ensure that it is legitimate.
The government will also take its share of taxes. If you owe any “state-owned-debt”, such as back taxes or child support, the lottery will deduct it directly from you prize.
Once you turn in that ticket, the most state lotteries release your name and hometown. You may want to hold a press conference to get the majority media attention done with. But the more discrete you can be, the better. Just know that there are drawbacks and benefits to both approaches.
Great wealth brought on all of the sudden to somebody unprepared can also bring trouble – spiritual, marital and a sudden deluge of friends, neighbors and charities. Wealth changes the way and places you typically operate in. People with fast fortunes can be vulnerable to not knowing what to do with it.
Financial counselors will help you slow down and operate wisely, provide a barrier to all the requests for money and help you'll begin receiving, advise you in ways to manage the money to protect you from blowing it, and help you invest your money so it can grow rather than shrink. It's not just a matter of money management, but also helping you deal with the pressure of sudden wealth on psychological and personal issues. Advisers can help and guide you through trust money, endowments, charitable remainder trusts, relatives, limited partnership and more.
Taxes are important to think about. Do what you can to minimize the estate tax that can eat up most of your heirs' inheritance. Be aware of your tolerance to risk, your level of knowledge and goals. Thinking forward to decrease future estate tax can also help you trim your present income tax.
To help avoid gift taxes and maximize tax savings, set up a trust. A living trust is a legal agreement that can be written up and changed as often as needed prior to the death of an individual grantor. The grantor may relegate any assets (such as receivables or rights from lottery winnings) to the trust. As the grantor, you may name yourself as the trustee to enable yourself to manage the trust's assets yourself, or you may choose to have yourself and someone else (such as a bank trust department or other financial institution) to be co-trustees and permit the bank to manage the assets.
Have an outside attorney or a trust department legal advisor to help you set up the required documents so that the specification of the trust agreement contains no surprises or complications.
The two major advantages to a trust are that you can gift in cash or assets more that $10,000 without being subject to federal gift tax and you can shift income from your own tax return to the trust, generally resulting in some significant tax savings.
Annuity.org prides itself on having the most accurate information on annuities and structured settlements on the internet. They have an entire section on annuities and lottery winners. It discusses the reasons for and against a lump-sum, the reasons for and against a long term payout and the specific rules and tax obligations one must follow.
Annuity.org: Annuities and Lottery Winners - Here you can find the reasons for and against receiving a lump-sum payment, the reasons for and against taking a long-term payout via an annuity and the specific rules and tax obligations you must follow.
Annuity.org: Annuities Overview - A complete overview of Annuities. Including information on the what they are, the different types, and the history of annuities.
Annuity.org: Settlements - A comprehensive guide to structured settlements. Information on how they work, how to handle as a minor and some pros and cons of structured settlements.
Source: Idaho Lottery Winners Guide
"Don't change anything today. Go to work, do what you do normally. Don't change anything about your daily life for at least six months until you feel comfortable with the money. Do what you do normally."
"Hand your money to your accountant, lawyer, and financial advisor to invest and have them teach you how to manage it. I was afraid of overspending, because once the money is gone, its gone. I budgeted every penny so that I could not overspend."
"I heard this from Oprah, but money is an enhancer of who you are. If you were a good person before you won you will most likely continue to be a good person – only with more money."
"We live on hope. Most of us do not have a lot of background or structure to prepare for the big win... I didn’t want to squander my winnings. I really saw it as a beginning, not an end, and full of personal growth potential for me as an individual."Back to top