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What to do When you Win the Lottery

By Edited Sep 7, 2015 1 2

If you play the lottery, whether you're a casual player who buys an occasional random ticket, or you're a serious player, you need to have a game plan for when you win. Why? Because 90% of lottery winners end up worse off than they were before, within five years of winning the lottery. With a little forethought, you don't have to be one of that 90%, but can be one of the few that manage your winnings well and gracefully.

  • First, if you win, do not claim the prize right away. You have time to prepare. If you haven't already, find a financial advisor who specializes in "windfall profits". This person will help you understand and navigate the hurdles involved in successfully managing a large fortune. If you don't know how to find one, start calling well-respected attorneys to find someone. Because there are many legal problems in managing large fortunes, attorneys will know who specializes in windfall profits and can find someone. If you are a client or potential client, these specialists are obligated to keep your confidence.


Prepare to win the lottery!
Lottery winners are often prey for con men


  • Second, when selecting a financial advisor, be careful not to get scammed. Do your homework and make sure the person has specialized in this area. Although he or she cannot reveal the names of clients (and you should run away from this person if any names are mentioned), they can tell you general facts about the types of windfall profits they have managed, and how they propose to set up protections for such sudden fortunes. If they are a CPA, they are required to keep your information confidential. Other financial professionals do not have this requirement, so it's always best to find someone who is also a CPA.
  • Third, follow their advice. In many cases, the route they will propose is a trust. This way, the trust will claim the prize, accept and administer the payments. If you have a family member who is a spendthrift or naive about money, it is vital that someone unconnected with the family administer the finances! This will be entirely discreet and nobody will know that you have won.
  • Fourth, tell no-one. Lottery winners often tell tales about being harassed, not just by friends and relatives, and charitable organizations, but lottery winners often become the target of "easy money" scams. By setting up a trust, the trust will receive payments for you and deliver them to you discreetly, and you will be spared the heartbreak of seeing what greed can do to those people you love.
  • Fifth, take annual payments. Never take the lump sum. In the first place, annual payments pay more money because they collect interest. So you get a much bigger payout in the long run. Second, your tax liability is when you receive the money, not when you win. So you will pay far fewer taxes in the long run, if your windfall profit advisor manages the money correctly. You win twice, because you get more money to begin with, and keep more of it in the end. And last, if you take the lump sum and fritter it away, that money is gone. If you fritter away an annual payment, you have many more years of practice to get it right!
  • Sixth, use the money as a springboard for making more. Don't spend it all, but invest wisely and diversify your holdings. A good rule of thumb is to set aside 10 per cent in savings for the future. In addition, you should seriously consider "paying it forward" and making charitable contributions. Not only will you be doing something positive for society, but you will be seen as a generous individual who allocates his fortune wisely.
  • And finally, plan for the future. Discuss with your attorney and your financial advisor what to do with the money after you die. If you have wisely put the money in a trust, you will need to direct the trust what to do with your money. Now is the time to provide for family members and to finance a cause you truly care about. Be sure that you spare your heirs from the windfall profits binge spending that often accompanies inheritances by giving them an income rather than a lump sum.

The sad fact is, lottery winners often do get harassed, and scammed, and worse, so you should consider this advice seriously. Abraham Shakespeare won the lottery, held a press conference and waved around the big check, took a lump sum, talked about doing good works but never got around to it . . . and a short time later, ended up buried in concrete five feet underground. The property on which he was found belongs to the boyfriend of his financial advisor (who was not a CPA). No amount of money, fame, or temporary friends is worth dying for.

Here's to your good fortune!

Lottery Master Guide
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Jul 24, 2010 1:00pm
Saving this I am sure I will win one day!
Apr 11, 2014 1:41pm
I got to this by the "hit me with something random" thread. And while I don't even play the lottery, it was a fun experience reading and imagining the win :)
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