My colleague over at CBS News MoneyWatch, Jill Schlesinger, wrote a wonderful piece on how to handle sudden wealth if you are lucky enough to win the Powerball lottery tomorrow worth $500 million. Here’s an excerpt of her four tips:
1) Read the rules on the ticket and on the lottery’s website. Sign your name on the back of the ticket, unless the rules forbid it. Then make a copy of it and put it in a safe deposit box. Don’t feel compelled to tell the world just yet.
2) Assemble your team. You need to interview estate attorneys, accountants and financial advisors. My jackpot-winning clients did something clever when they approached potential professionals: They went through the interview process by discussing their situation, but didn’t disclose how much they had won until late in the meeting. That way they could tell whether an adviser treated all his or her clients with respect or just the rich ones.
3) Determine whether you will accept the payout as a lump sum or in installments. At this point, the lump sum for the $500 million prize is $327 million before federal taxes are applied and $245.2 million after-tax. Conversely, you could choose to receive annual payments over 29 years, which would amount to $16.6 million a year pre-tax and $12.5 million after taxes. This does not include state or city taxes, which would further reduce your take. You have 60 days, after you claim your ticket, to make the decision.
4) Determine the legal structure of your investment holdings. Your attorney will help determine whether you should utilize trusts, limited liability companies or even corporations. Depending on your state of domicile, each may have advantages and disadvantages in terms of taxation, as well as privacy.
For more information on how to handle sudden wealth, you can read about Robert Pagliarini’s expertise in managing sudden wealth.