Lotta Dough: What to do when you hit the lotto!
No matter if you dreamed up the numbers or do a quick pick - your ultimate goal is win the jackpot! I get it, I got a couple tickets myself (I keep it real).
All of us dream on winning the lotto, grabbing the check and dipping off. But many of us fail to plan in case you do actually win. No worries - I got you covered. Here are some things to have in line for when all of your 5 numbers align:
Remain Anonymous: Make a list of those people you want to tell. Be mindful of who you hip to your new tax bracket, money can change people. You already know once you tell one - they are going to tell someone else and the streets will be talking. After that, they start throwing their hands out like World Star! Keep your identity close like you do your potential bae. Tip: Check each state to see whether you can dodge them all by remaining anonymous. That might not be an option. Grab your mask and then your money.
Take yo time: Depending on where you bought the ticket, prize winners have between 180 days and one year from the date of the drawing to claim their prize. Make a plan before you go snatch your winnings!
Go to the pros: Find a tax pro or CPA to gain perspective on your new tax bracket. When you win you have the choice between taking the winnings all at once (lump sum) or having it paid out in 30 installments over 29 years in the form of an annuity. With a lump sum payment, you must immediately pay tax on the entire amount, but within installments you are going to have to pay taxes on each annuity payment. State + Fed taxes will hit you no matter which option you go with. But the Feds will hit the hardest with the lump; legit nearly half.
Keep in Mind: With annual payments, you run the risk of the winner passing away in mid payments and leaving your family to pay estate tax. Solution: Work with your Money team to see what options like a Trust would be good for protecting your generational wealth.
Change brings Change: “Looking Good Billy Ray! Feeling Good Louis!” This classic line from one of my favorite movies “Trading Places” leads me up to my next point. Don’t go from taking the bus one day to buying a Bugatti the next day. Yield into your wealth. Build a money team (I’m available) to make sure your money last longer than your generation. Start studying money habits before your money changes. Tip: Make a WANT and NEED list in the timeline of 1 -3-9-12 months increments. Find ways to scale that money to make you more money.
Gather your debt: Before you hear your winning numbers on the TV - get to know your number. Not your phone number, but the total amount of debt and who it is owed to. Peep at your budget and make a ‘big pay back’ list. Stay true to that list, don’t get new to it when you win. Pay before you play, hmmk?
Get with the Money Team: I called this out in #4, but this is one of the biggest things you can do with winning (after giving thanks and gratitude). Get your team in formation: handpicking a lawyers (yes, with an S - there’s a multitude of lawyers that you will need from collecting the money to protecting you from lawsuits), accountant and investment advisor. The key to this is making sure that they are working together for YOUR benefit. The worse thing is for you to have folks on your team that will have you looking like Rihanna in “B*tch better have my money!”. Know their fees (initial and annually). Require them to give you weekly or monthly reports of your coints and don’t be afraid to roll up on them. I mean, it is YOUR money! Get an estate plan in place too. These folks are like your board of directors. Take their advice, but also research their recommendations. Study to show yourself approved. Vet them out along with retainer before hiring them. Remember - it is a partnership!
Funnel yo Funds: What I mean by this… invest! Take that new given money to allow you to make mo’ money! Create a diverse portfolio of investments that match short and long term gain. Get some ETFs, individual stock, real estate, generational trusts, CDs/Mutual Funds - the list of investments are endless. Just don’t pick one vehicle with investing (with or without the lotto).
Tip: Ask your advisor which method they prefer for YOUR financial objectives. One method I suggest: split your portfolio half-and-half between equities (stocks) and fixed income (like bonds).
Protect your House: Having a trust/will and life insurance is already a given before winning the lotto and it only increases now. Protect your assets to secure generational wealth to keep your family’s new lifestyle going. Get your money team to create multiple asset protection strategies to keep your money in tact - during life and after death. People will do anything to get your everything.
Give it out: Being rich doesn’t mean you hold on to it like your life depends on it. Find or create a charity to give back to the people. Not only does it help others but also your tax bill. A donor-advised fund will allow you to make a charitable donation and claim a federal tax deduction for your irrevocable contribution. For those of faith, give your 10%, yes that’s a lot, but you got a lot sooo.. Do it! Money doesn’t unlame a lame - make sure your mindset is solid before the money comes.
Have FUN!: Yes, I give your advice about creating a money structure when you money restructures, but I also want you to live life (Alexa: Play ‘Living my Best Life by Lil Duval). Partnering with your accountant create a budget line (allowance) that gives you the opportunity to travel, buy your mom and nem (them) a new house or upgrade your life. But the key is to do it within reason. The unfortunate truth about winning the lottery is that many people lose most (if not all) their money. I don’t want that for you. Have fun but also have funds (now and later)!
Determine your accessibly: You already know your distant cousin and friends are going to come out the woodworks. Have a plan in place. Know who and how much you want to give out. Also, you can change your number and zip code (P.O. Box) if you want.
Congratulations on winning the lottery my friend! May your new wealth impact your life and increase the lives of others. Formulate a plan, funnel your funds and have some fun! (Does money dance)