What to do when you win the lottery

Friday, March 30th, 2012 By

A Taiwanese lottery ticket.

Know what to do when you win the lottery, even if it's in Thailand. (Photo Credit: Public Domain/Love Krittaya/Wikipedia)

The Mega Millions lottery could make a lucky person about half a billion dollars richer, but the odds are stacked against it. Gambling on any kind of lottery is not the best use of one’s money, but people will participate regardless. With that in mind, it pays to know what to do when you win the lottery, for the sake of argument. Otherwise, you’ll blow through the money in no time.

Protect your ticket

Before you share news of your good fortune with anyone else (family and friends included), sign the back of the winning ticket, photocopy it and store the actual ticket in a safe or safe deposit box. Digital copies of the ticket aren’t a bad idea if you have a scanner, too.

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Once you’re confident that the ticket is safe, contact lottery authorities. Take your time. Most lotteries give the winner 180 to 365 days to claim the prize. Wait it out so that you can avoid the media frenzy.

Don’t quit your job

Don’t make the snap judgment to quit your job. Verify that you are indeed the winner, know how much you’ll be receiving and decide how important your job is to your sense of daily fulfillment. Also, don’t let your employer know. They may assume you’re going to leave and start looking for a replacement, whether you’re ready or not.

Hire a tax attorney and financial adviser

A licensed accountant, tax attorney or family planning attorney can come in handy after you’ve won the lottery. Take time to research attorneys and financial advisers in your area before choosing the one you want to help manage your finances. If you receive advice that you’re uncomfortable with, get a second or third opinion. You can afford to be choosy at this point.

Change you phone and address so you’re unlisted

Word will eventually surface that you’ve won the lottery. Change your phone number to a new, unlisted number, perhaps with a service like Google Voice. Also, start using a post office box for your mail.

Choose your prize distribution

Most large-scale lottery games offer a lump sum or annual payments over 20 to 30 years. There are pros and cons to each, depending upon the tax laws of your state. Consult with your tax professional and financial adviser and consider the lifestyle you’d like to lead. If you’re already in your golden years, a lump sum could make more sense than a 30-year payout.

Use your money advisers often

Periodically consult with your financial advisers after you’ve won your lottery prize. Make sure they’re still on the same page as you when it comes to financial goals. If the winds have changed, consider hiring a different adviser.

Pay off high-interest debt

Revolving, high-interest debt is a silent killer, and paying it off completely is the only escape. Keep your primary mortgage going, so long as the interest rate is low, however. That way it’s still a tax deduction you can use, which helps now that you’re in a higher tax bracket.

Keep an emergency fund

Set aside enough of your lottery winnings to pay for six months of your expenses. In the event of a financial emergency – for example, a dishonest financial adviser – having that money around can save you from the street until you’re back on your feet.

Start college and retirement funds

If you have children, lottery winnings are perfect to start 529 college savings plans for them. It’s never too early. If you are an empty nester or childless, a retirement account in the form of an annuity is a great idea. Make those winnings work for you!

Give to charity

Not only do charitable donations help those less fortunate, it helps create tax deductions. It also feels good to know you’re helping others.

Be very selective with your investments

Many people will approach you with business ideas after you’ve won the lottery. Learn how to say no to them. Run everything by a trusted adviser first. Agree to fund one well-planned venture every so often, perhaps one per year.

Sources

Forbes

Fox News

Money Crashers

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