Dear Florida Powerball lottery winner, congratulations on your win! You beat the odds (1 in 175.2 million) and have the distinct honor of being the largest single lottery winner in U.S. history. As someone who has developed a national reputation for working with sudden wealth recipients – or as a client recently remarked a “lottery financial advisor”, I want to share with you a few ideas on how best to handle the rush of emotions of winning – and possibly the anxiety and paralysis over what to do now – with a few best practices I’ve learned over the years of working with clients who come into a windfall. Here are six things to do before you claim the prize:
- Sign the ticket. You want to make sure you immediately sign the winning lottery ticket. Lottery tickets are “bearer” instruments. This means that whoever holds the ticket is the winner. I would also suggest you take a photo and video of yourself with the ticket. If something unforeseen happens, these steps go a long way to prove you are the owner of the ticket.
- Take care of yourself. This step has nothing to do with your lottery prize and everything to do with you and your health. While everybody handles these things differently, it’s not uncommon to experience anxiety, paranoia, or even strange out-of-body feeling where things move in slow motion as if you were watching your life on a movie screen. For some, these feelings are fleeting, but for others, they can persist and make it hard to sleep, function, and make logical decisions. So, first and foremost is making sure you take care of yourself. Seek professional help if necessary.
- Decide if you want a lump-sum or an annuity. The next step – and one that is usually glossed over — is to figure out just exactly how much you’ve won and whether you want a lump-sum or an annuity.Although the stated prize is $590 million, it’s a bit misleading. With big lottery wins like yours, you have the option of taking a lump sum payout or to receive the payout over time. If you choose the lump sum option, the amount is $370,896,780.50. If you are a U.S. citizen, the IRS will automatically withhold 25% for taxes – providing you $278,172,585.40. Of course, you’ll be on the hook for more than 25% to the IRS. The real after tax amount will be closer to $224,000,000.But instead of the lump sum amount, you have the choice of receiving 30 payments of $19,683,000 per year for 29 years. Although a great majority of lottery winners opt to receive a lump sum amount, there are definitely some advantages (and disadvantages) to taking the payout over time. You’ll want your CPA and financial advisor to “run the numbers” for both options and discuss the pros and cons of each. The big advantage for taking the money over time is that it provides you a “do over” card. We’ve all heard the stories of lottery winners who have lost it all in a few short years. By getting the money over time, even if you are careless the first year, you get 29 more chances to get it right. It’s definitely something to think about sooner rather than later, because you have 180 days from the drawing to claim the prize, but if you want the lump sum payout, you only have 60 days from the drawing. Also, the day you claim the prize, you will need to make your decision, so you’ll want to get your team assembled so they can crunch the numbers for you.
- Assemble your team. With a lottery win as big as yours, you’ll want to make sure you have a stellar team who can help you make the best decisions. You’ll want an attorney – actually, you’ll undoubtedly use several types of attorneys (business, tax, trusts and estate), but don’t worry about finding all of these on day one. Find a good attorney to guide you through the initial steps and who can introduce you to others as needed. You will also want a CPA and a financial advisor skilled in managing sudden wealth.
- Make a publicity plan. Unfortunately in Florida, you don’t have the option of remaining anonymous. As soon as you claim the prize, your little town of Zephyrhills, Florida and the rest of the world will know your name. Journalist and TV reporters will come from far and wide. They will dissect everything you’ve ever done and will want a piece of you. The best approach is to develop a public relations strategy to control the message as much as possible. Figure out what you want to share and what you don’t and decide if you will be your own spokesperson or if you want to have someone else speak on your behalf.
- Don’t lose yourself. Lottery winners will often complain that after winning their lives are turned upside down and that they are thrust into a new life. It’s hard to keep things exactly as they were when you get a check for over $200 million, but at the same time, you don’t want to lose the aspects of your life you now cherish. Step outside the craziness of the situation for a moment, and make a list of Who and What you love about your life that you don’t want to change. Money is best when you use it to improve your life, not necessarily change it.
Follow these six steps to get control of an otherwise seemingly out of control situation. Regardless of what you are feeling now, when the lights fade and the cameras go away, things will calm down and you will be able to enjoy your newfound wealth.