If you and your heirs are adept at handling cash, you can enjoy a comfortable lifestyle for decades to come. The moment you accept the prize, however, vultures will swoop down to get their share of your bounty. And if you’ve never been good with money in the past, you might end up being your own worst enemy by frittering it away.
The New York Lottery’s Carolyn Hapeman recommends signing the back of the ticket as the initial safety measure you can take before the drawing. She describes that a lotto ticket is a “holder instrument,” indicating that the winner will be whoever needs to sign the ticket and shows identification. So, if you’re waiting for a bus and the ticket blows through your hand, or if you’re showing it to a friend at a bar and you forget to sign it, you’ve lost the cash.
Some Precautions to Take to Avoid Further Dangers Are Outlined Below
The majority of them can be applied to other unexpected financial gains, such as those resulting from inherited wealth or the buyout of a company.
Keep Your Anonymity
As soon as word gets out that you’ve struck it rich, you’ll be inundated with requests for donations from everybody from charitable organizations to long-lost relatives and close friends, not to mention economic “specialists” who are eager to earn your business. You should verify the laws of your nation to see if you can stay anonymous and thus avoid any penalties.
Winners have between 180 and 365 days from the drawing date to claim their award, based on where they purchased the ticket.
Before You, Cash in Your Winnings, Consult a Tax Expert
The winnings can be taken as a lump sum or as an annuity paid out over 29 years in 30 equal installments. New York financial adviser Michael A. Kirsh says that anyone receiving a large sum of money all at once must pay taxes on the entire sum right away. The payouts from an annuity are taxed only when they are received. Some people may benefit more from the self-control of getting their cash as an annuity than they would from the freedom to spend it as they see fit. Kirsh, however, points out some additional disadvantages to this method of payment. You should evaluate the annuity’s yield against what you might earn by withdrawing the money in a single payment, submitting tax returns, and then putting it into investments.
Kirsh warns that taking out an annuity may leave your loved ones high and dry if you pass away before the 30-year timeframe is up. Life assurance policies are commonly used to pay for the inheritance tax in such cases. (Powerball also guarantees the payout of an annuity prize to a decedent’s estate, as stated in its frequently asked questions.)
If You Win the Lottery, You Have 60 Days to Figure Out What to Do With the Money
Throughout this time, you should consult with experts to determine the best method of payment for your situation.
You Should Not Make Any Drastic Changes to Your Daily Routine
Do nothing hasty like giving up your job, purchasing an apartment in Europe, upgrading to a luxury car, or starting a catalogue of Birkin handbags for the first 6 months after winning the lottery. In the meantime, it’s only human to be eager to commemorate your lottery win, so allocate a certain sum to frivolous spending.
Put off those major buys for now. Guerdon Ely, a financial adviser in Chico, California, suggests renting a home in the area you’re considering before making a permanent purchase. Get a used car for now if you need a different vehicle.
Settle All of Your Financial Obligations
Your return on investment is always the same, regardless of whether you are investing in a credit card or a house. This is particularly true in light of the pitiful returns available on traditionally safe investments like CDs and Treasuries right now. Every dollar you put towards reducing your debt is one you no longer have to worry about. It is impossible to predict whether or not a dollar invested will increase in value.
Collect a Group of Accountants and Lawyers to Help You Out
It’s difficult to tell “who’s attempting to assist you and who’s attempting to use you,” as Ely puts it. Instead of committing to working with a predetermined team of advisors, he suggests instead picking your own legal counsel, financial planner, and investment expert and insisting that they all coordinate their efforts.
Those who live in rural areas and need legal representation but don’t want local attorneys privy to their private affairs should travel to the nearest major city to find a competent attorney. Trust and estate attorneys can be located through the American College of Trust and Estate Counsel or through the online lawyer directory, both of which can be searched by location and area of practise.
You can think of the group you assemble as your management team, Ely says. Starting with having a fee-only advisor develop an extended financial plan and sharing it with the group for feedback is a good place to be. After you settle on a strategy, they can act as a check and balance on one another. Select one to take charge and coordinate everyone’s efforts. That individual can also take on the role of “bad guy,” saying “no” when asked to donate to groups you don’t support.
Don’t be a fool with your money. Ely suggests investing the money in something safe with a short-term horizon and not touching it for at least six months. Next, consult with your financial experts about constructing a portfolio that includes both equities (stocks) and fixed-income investments (like bonds). Don’t put your money into investment funds that you don’t fully comprehend or that seem too appealing to be true.
Try to Stick to a Set Monthly Income and Expenditure Level
It can take self-control to keep your prize money and not go on a spending binge, particularly if you’re not used to having lots of cash. Spending only your monthly income instead of your principal is one way to exercise self-control. An attorney with McGuireWoods in Richmond, Virginia, named Dennis I. Belcher, notes that “it requires a great deal of principal to generate revenue and then once you start spending principal, the principal rapidly disperses,”, particularly in today’s investment industry.
Safeguard Your Property
The wealthy should take precautions to protect their possessions from being taken by creditors. They can range from exes and exes with a grudge to people who have won legal cases against you. If individuals have an impression that you can pay any legal fees they come up with, they could seek justifications to sue you. “If you win the Powerball, everybody will be laying in front of your car so that you can run over them and they can sue you,” says Ely. You should take precautions to avoid appearing vulnerable.
The better line of defence is to put up barriers in such a way that your creditors have a very hard time getting at your assets. Trusts, family limited liability partnerships, and limited liability corporations are all tools that can be used as part of a wider arsenal of asset protective measures that also includes utilising state-level exemptions. Many tactics might work, either singly or in tandem.
Donate Ahead of Time
Your winnings (or annuity payments, if you choose that route) may be subject to yearly income taxes, but you may be eligible for a charitable deduction equal to the amount you donate. Donations to public charities qualify for a tax deduction equal to up to 50% of the donor’s AGI in the case of monetary gifts and up to 30% of the donor’s AGI in the case of gifts of other praised funds owned for more than 12 months.
If you’re taking the $930 million fixed amount of the $1.5 billion prize and haven’t decided which charitable organisations to endorse by the end of the year, a donor-advised fund might be a good option. Donor-advised funds allow you to make an immediate, irreversible donation to charity while deferring decisions on which charitable organisations should obtain grant funding from the account until a later date.
Now that you know how to handle your money if you win the jackpot, start participating in South Africa’s first free online lotto draw here, to try your luck!