11 Survival Tips for Lottery Winners

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No wonder some lottery players are dreaming big. Behemouth jackpots are being awarded, including prizes over $300 million each in the multi-state Mega Millions and Powerball lotteries.

With payouts like these, winning the money is only half the game. Winners need to have — or quickly assemble — a strategy for staying sane, anonymous and in the black for the rest of their lives.

Keep reading to learn what every new millionaire lottery winner should know.

1. Stay anonymous

Woman's face obscured by shadow, hat
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Recently, a lottery winner in Jamaica collected his $95 million dressed in a Darth Vader costume. The name he used: “W. Brown.” The disguise was an effort to hide his identity and also to deter theft, says Fox News.

He had the right idea. When you win big, the impulse is to shout your good fortune from the rooftops. But hold back; stay anonymous, advises State Farm Insurance. Some lotteries require winners to participate in a press conference and give interviews. But, if possible, keep your big news to yourself.

Otherwise, you’re inviting a deluge of appeals for donations, as well as scammers and other predators looking to take advantage of your new wealth.

2. Find a financial adviser and an attorney

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Many a lottery winner has ended up penniless due to spending, partying, gambling and generosity, says Yahoo’s article on winners who ended up broke.

You’ll immediately need a team of vetted and trusted professionals to help you invest wisely, prioritize spending and create an estate plan. Don’t think Uncle Billy can help just because he has an ETrade account.

Start by selecting a trusted estate attorney and financial adviser, typically a Certified Financial Planner (CFP) who must meet standards for training, experience and ethical behavior. Even better, select a firm that has expertise in helping people manage and adjust to new or sudden wealth.

Check out: “How to Find the Right Financial Adviser.”

3. Learn the rules before signing your winning ticket

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Protect yourself, your ticket and your winnings. First, says State Farm, make several copies of both sides of your winning ticket. But don’t sign it yet.

Typically, you’ll have time before the deadline for claiming the prize.

Next, before you sign the ticket or take any action, meet with your trusted advisers.

Says State Farm:

“Once you have a team of advisers in place, have them look over the rules and contract before you sign the original ticket — in some cases, signing your ticket might prevent you from creating a blind trust later.”

4. Hire a CPA

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Your lottery winnings are not exempt from taxes. Both Uncle Sam and your state will want their cut.

While there is no avoiding taxes, a licensed CPA (certified public accountant) may be able to suggest strategies to minimize what you pay.

Find a firm and an accountant with experience working with big numbers.

Your CPA also can ensure that your tax returns are filed correctly. This isn’t a job for someone who files taxes as a side hustle in the spring.

5. Decide: Is a lump sum the option for you?

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When you win a major lottery award, you’re typically given a choice: Take the money in a lump sum (typically about 60% of the total value, according to State Farm) or receive annual annuity payments over a set span of time.

The immediate cash payout is typically less than the advertised jackpot. That’s because you won’t receive the interest that would have been earned on the cash value when invested over time.

Take the lump sum if you a restrained and disciplined type who will plan carefully with the help of professional advisers. You may be able to invest the money to yield even more than the total annuity payments.

Also, taking the cash means paying taxes on all your winnings now, when tax rates may be lower than they will be in the future.

Be cautious, though. There are too many tales of woe about lottery winners who took the maximum payout and became broke and with ruined relationships.

6. Collect over time to avoid frittering it away

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Ask yourself: Am I the type to spend $20 the instant it lands in my wallet, make impulse purchases or invest emotionally? If so, the yearly annuity payout is the way to go.

The decision boils down to knowing yourself and your temperament. The annual payment route provides safety and guardrails so you can invest and spend without risking your fortune if you make some poor decisions. Even if you make mistakes one year, there will always be more cash coming your way.

7. Pay off your debt

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With your CPA, attorney and financial adviser, now you can start using all that money.

A top priority should be paying off debt. Why owe money on a high-interest credit card when you have millions in the bank?

As for other forms of debt, some argue it’s better to invest money rather than pay off low-interest loans for (for vehicles, for example) if you can make in the market than you’ll pay in interest.

Many of us would sleep better at night being debt-free, however. As for student loans and mortgages, there’s no reason to keep those for a tax deduction if you’re taking your winnings in annuity payments. Those deductions phase out for high-income households, points out Zacks.

Check out:

8. Fully fund your savings goals

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Another priority: funding all your savings goals. That means setting aside money in an emergency fund, maxing out retirement savings and getting college accounts set up for the kids.

You may also want to designate funds for travel, a house or other big purchases you’d like to make in the future.

Your CPA and financial adviser can help you determine how best to fund your goals while minimizing taxes and managing risk.

9. Be strategic about charitable donations

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Many lottery winners love to spread the wealth. They may give money to family, friends and favorite charities. It’s great to be generous, but don’t do it in a haphazard way.

Work with your CPA and financial planner to prioritize tax-deductible charitable gifts as well as those handouts to family and friends.

Decide the causes you are most passionate about — battling world hunger? Saving elephants? Funding local arts? Whatever your causes are, do research to find out which organizations are best at addressing the issues and efficient stewards of your donation.

Having a plan makes it easier lets you breathe easy and avoid feeling pressured to fund every organization and individual who asks for money.

Check out: “6 Tips to Donate to Charity the Smart Way.”

10. Splurge smart

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What’s the point of winning all that money if you can’t have some fun with it?

It’s likely you will want to use some of the windfall to splurge on a new car, new house or to fulfill other treasured dreams.

Remember, though: Even the biggest bank accounts can eventually run dry.

11. Get used to saying “No”

Woman gestures "no."
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If you win the lottery, you’ll need a skill that may be new to you: Saying “No” to requests not in your plan. And it’s likely there will be many.

Even if you stay anonymous, people in your inner circle may know that you’ve come into some cash. Word may trickle out to others.

Lottery winners must work at learning not to be an ATM for others, even as they learn to say “No” to some of their own desires.

Whether you have $16,000 or $1.6 billion, if you haven’t planned for it in your budget, think hard about spending the money. Even some billionaires lead surprisingly frugal lifestyles.

Check out: “9 Famous People With Surprisingly Frugal Habits.”

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