what to do first when you win the lottery

10 Things To Do When You Win The Lottery

Gallery: 10 Steps To Take When You Win A Lottery Jackpot

Editor’s note: This post was updated on January 12th, 2016, to reflect the current $1.5 billion Powerball jackpot and the 2016 lifetime exemption from estate and gift taxes.

The jackpot for tomorrow’s Powerball drawing has hit $1.5 billion. If you win it, you won’t ever have to worry about money again–right?

With good money management you–and your heirs–could live handsomely for many, many years. But from the moment that you claim that prize, you will be descended upon by vultures who want a hefty helping of those winnings. And if you didn’t have smart money habits up until now, you could easily turn out to be your own worst enemy by quickly squandering the fortune. (See my post, “Thieves And Forgers Rush In Where Big Spenders Dare To Tread.”)

The first precautionary step you should take between now and the drawing is to sign the back of the ticket, says Carolyn Hapeman, a spokeswoman for The New York Lottery. A lottery ticket is a bearer instrument, she explains, meaning that whoever signs the ticket and presents a photo ID can claim the prize. So if you haven’t signed the ticket and it blows out of your hand while you are waiting for a bus, or if you show it to a buddy in a bar and accidentally leave it on the counter, you’ve lost the loot.

Here are some steps to help you steer clear of additional risks. Most of them work well for other windfalls too–for example with sudden wealth that comes from an inheritance or the sale of a business.

1. Remain anonymous if your state rules permit it. Once people know you’re suddenly wealthy, you’ll be badgered by requests for handouts from everyone from charities to long-lost friends and relatives–not to mention all the financial “experts” who will be vying for your business. So check state rules to see whether you can dodge them all by remaining anonymous.

Rules on winner publicity vary by state. In New York, for example, winners’ names are a public record. Elsewhere it may be possible to maintain your anonymity by setting up a trust or limited liability company to receive the winnings, says Beth C. Gamel, a CPA with Pillar Financial Advisors in Waltham, MA. A client of Gamel’s who won a past lottery did that, and had a lawyer claim the prize on behalf of of the trust. In South Carolina, it’s also possible to remain anonymous.

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. So find out what the state rules are and plot a course.

2. See a tax pro before you cash the ticket. You have the choice between taking the prize money all at once 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, says Michael A. Kirsh, a financial planner in New York. With an annuity, you are taxed only as you receive the payments. People who have trouble controlling their spending might prefer the discipline of receiving the money as an annuity. But this payout form has other drawbacks, Kirsh notes. You will want to compare the effective yield of the annuity with what you could earn by taking the money as a lump sum, paying the taxes and investing the proceeds.

Another issue to consider is whether taking an annuity will leave your family without the cash they need to pay estate tax if you die before the 30-year period is up, Kirsh says. In such situations people typically buy life insurance policies to cover the estate tax bill. (Powerball also says in its FAQs that it will cash out an annuity prize for an estate.)

You have 60 days from the time you claim your lottery prize to weigh the pros and cons. During this time, ask advisors to crunch the numbers and help you decide which type of payment suits you best.

3. Avoid sudden lifestyle changes. For the first six months after you win the lottery, don’t do anything drastic, like quitting your job, buying a home in Europe, trading up for a luxury car or building a collection of Birkin handbags. Meanwhile, set aside a fixed amount for splurgesit’s only natural to want to celebrate your windfall.

Save the big purchases for later. For example, you could rent a house in the neighborhood where you were thinking of moving, before you make any commitments, says Guerdon Ely, a financial planner in Chico, Calif. If you need a new car, buy a budget model for now.

4. Pay off all your debts. As I wrote in my post, “The Best Investment Advice I Ever Received,” there is no better investment than paying off debts. Whether it is credit card debt or a mortgage, your rate of return equals the interest rate on the loan. With today’s abysmal yields on relatively secure investments like CDs and Treasurys, that’s especially true. When you’ve paid down a dollar of debt, that’s a dollar you no longer owe. When you invest a dollar, you can’t be sure whether it will grow or shrink.

5. Assemble a team of legal and financial advisers. In situations like this it’s very hard to know “who’s trying to help you and who’s trying to use you,” says Ely. Rather than signing on to a group of advisors that someone else has put together, he recommends handpicking your own lawyer, accountant and investment advisor, and requiring them to work together.

Carefully vet each advisor before discussing your situation. Check broker records at the Financial Industry Regulatory Authority. For attorneys and insurance agents, see whether there have been any complaints filed with state disciplinary authorities.

If you live in a small community and don’t want lawyers there to know your business, seek out a professional in the nearest large city. Names can be found on, the nationwide lawyers’ directory that you can search by location and area of practice, and on the Web site of the American College of Trust and Estate Counsel, a group of trust and estate lawyers.

In effect, the team you put together will function as your board of directors, Ely says. You can start by having a fee-only advisor put together a long-term financial plan and running it by the group for comment. Once you’ve decided on a plan, they can provide checks and balances on each other. You can ask one of them to serve as quarterback, coordinating the group effort. That person can also play the “bad guy,” declining requests from people or organizations for gifts that you don’t want to make.

6. Invest prudently. Ely recommends putting the money in safe, short-term investments and not even touching it for the first six months. Then ask your advisors is to put together an investment portfolio divided half-and-half between equities (such as stocks) and fixed income (like bonds). Don’t fall for investments that you don’t understand or that sound too good to be true.

7. Live within a budget. Especially if you’re not accustomed to having a lot of money, it may take some discipline to preserve your winnings and not go on a wild spending spree. One way to restrain yourself is to only spend income–not principal. Especially in today’s investment world, “It takes a lot of principal to generate income and once you start spending principal, the principal quickly dissipates,” says Dennis I. Belcher, a lawyer with McGuireWoods in Richmond VA.

8. Take steps to protect assets. People who are worth a lot of money need to guard against losing assets to creditors. They include everyone from disgruntled spouses and ex-spouses to people who win lawsuits against you. If people think you have deep pockets they may look for reasons to sue. “If you win the Powerball, everyone’s going to be laying in front of your car so you can run over them so they can sue you,” says Ely. It’s prudent to ensure you are not an easy target.

The best defense is to erect a variety of roadblocks that make it difficult, if not impossible, for creditors to reach your money and property. These asset protection strategies, as they are called, can range from relying on state-law exemptions to creating multiple barriers through the use of trusts and family limited partnerships or limited liability companies. It may be possible to rely on a variety of strategies, either separately or in combination with each other.

9. Plan charitable gifts. You can offset one of the additional income from your lottery winnings (or the annuity payments if you take it that way) with an annual charitable deduction. For gifts to a public charity, donors are entitled to an income tax deduction for up to 50% of adjusted gross income (AGI) for cash contributions and up to 30% for donations of other appreciated assets held more than 12 months.

If you are take the $1.5 billion prize in a $930 million lump sum, and are unable to decide between now and year-end which charities to support, it may be worth considering a donor-advised fund. With a donor-advised fund, you can make a charitable donation this year and claim a federal tax deduction for your irrevocable contribution but postpone recommendations about which charities should receive grants from the account until some time in the future. If you don’t want to be badgered by requests, see my post, “How To Stay Anonymous When You Give To Charity.”

10. Review your estate plan. If your winnings have made you suddenly wealthy, this may be the first time that you need to plan for estate tax. The 2012 tax law offers more flexibility than ever before. As of 2016, each person has a $5.45 million limit on tax-free transfers, which can be applied during life, when you die or some combination of the two. So if you want to share some of your largess with family and friends, this is the ideal time to do that. For details, see my posts, “6 Ways To Give Family And Friends Financial Aid” and “Give Your Estate Plan a Checkup.”

I’m a financial journalist and author with experience as a lawyer, speaker and entrepreneur. As a senior editor at Forbes, I have covered the broad range of topics that…

I’m a financial journalist and author with experience as a lawyer, speaker and entrepreneur. As a senior editor at Forbes, I have covered the broad range of topics that affect boomers as they approach retirement age. That means everything from financial strategies and investment scams to working and living better as we get older. My most recent book is Estate Planning Smarts — a guide for baby boomers and their parents. If you have story ideas or tips, please e-mail me at: deborah [at] estateplanningsmarts [dot] com. You can also follow me on Twitter

If you didn’t have smart money habits up until now, you could quickly squander the fortune.

What to Do if You Win the Lottery in 2019

Jul 25, 2019 6:46 PM EDT

So here’s a dream scenario.

After playing the lottery for years, your ship has finally come in as you win $1 million (or more) playing the lottery.

Your first reaction is disbelief and your second one is pure elation. You check your numbers once, twice and thrice and yes, your win is legit and you raise a glass to celebrate.

Sooner or later, though, you’re going to have to figure out just how you’re going to play your lottery win.

After all, you don’t want to wind up like one of those lottery winners who make rash (okay, dumb) decisions like not remaining anonymous or not working with a trusted financial planner before cashing in on their lottery tickets.

Those are the lottery victors that academics talk about when they say lottery winners are more likely to declare bankruptcy than non-winners and that winning the lottery and squandering the money leaves winners depressed and unsatisfied.

Hey, that’s what can happen when you cash in a winning lottery ticket, temporarily join the top 1% of income earners, and fall off the cliff financially after making bad post-lottery decisions.

Don’t let that happen to you. Take these positive action steps when you win the lottery and learn not only how to keep your new-found growth, but make it grow for the long haul.

What to Do if You Win the Lottery: 7 Steps

1. Take Your Winning Lottery Ticket and Sign It

Verify that you are the owner of the winning lottery ticket by signing it immediately (sign it on the back of the ticket). Keep it in a safe place – a bank safe deposit box will work, as will a home safe. The goal here is to secure your winning ticket and have it at your disposal when you need it.

2. Keep a Sharp Eye on the Clock

Most lotteries have an expiration date for winning tickets, and it’s up to you to know those expiration dates. There’s no immediate threat of turning your ticket in before it expires, as most state lottery expiration dates are months or even a year after the lottery is over. Still, know that date cold as you prepare your financial plan before turning in your winning ticket.

3. Get Working With a Good and Trusted Financial Planner

Let’s face facts, if you have a health issue you go to a doctor. If you have an engine problem you take your vehicle to a mechanic. So, if you have a $1 million windfall drop in your lap and you don’t know what to do, you take it to a professional money manager.

A good wealth manager can walk you through the myriad issues tied to a winning lottery ticket, including taking the money in a lump sum versus a regular annuity payment every year, tax issues prevalent with lottery winnings, and how to manage your new-found wealth going forward.

If you don’t already have a financial planner in your life, discreetly ask people you trust for references or visit the National Association of Personal Financial Advisors web site, which lists and vets good money managers for you.

4. Remain Anonymous

Ask a previous lottery winner his or biggest regret and invariably it will be their decision to go public with their lottery win. As they found out, vanity and haste would cost them later, as long lines of prospective beneficiaries lined up to beg them for money, a handout, or a (likely dubious) business partnership.

Then there are the inevitable requests for loans and gifts from people you know and trust, including family members, friends, co-workers – even that guy who played on your softball team a decade ago.

The fact is that people will come crawling out of the woodwork looking for a handout once you go public as a lottery winner. It’s much better to remain anonymous and remain in control over any financial moves you make with your windfall. You’ll want to have flexibility over things like charitable donations, business and personal investments, and any cash loans or gifts you want to bestow on a friend or loved one – or just someone in need.

Remaining mum about your lottery gives you that control, and keeps you out of the limelight and away from prying eyes after you cash in on your lottery win.

5. Get Insurance

If you don’t remain anonymous, you could be targeted by unscrupulous individuals or organizations that will hound you with nuisance lawsuits designed for one reason – to grab some of your new-found wealth.

That’s why it’s also a good idea to also hire an estate planning attorney, and insurance specialist, and even a good lawyer (for a reasonable retainer.) The idea here is to take every step needed to protect your assets from nuisance lawsuits and litigation-happy family members or business partners from trying to help themselves to your lottery cash.

6. Live Within Your Means

Yes, you now have a great deal of money in your bank account – more than you’ve ever had in your life. Thus, it’s tempting to spend that money, especially if you’re worried that someone may take it away from you via lawsuit, by fraud, or by poor money management decisions that lead to your lottery winnings flying out the window.

Don’t think like that. If you’ve followed the money management tips listed above, your money will be well-protected and insulated from fraudsters, pests and thieves.

With that reassurance, further protect your money by sticking to tried-and-true financial basics, like adhering to a household budget, making smart and stable investments, and having a good long-term financial plan designed to keep you wealthy not just for today, but for 20, 30 and 40 years down the road.

7. Don’t Quit Your Job – Yet

The question over quitting your job or not after winning the lottery is a valid one, based on unique characteristics. If you hate your job, for instance, leaving it is entirely understandable. After all, who needs the stress?

Or, if you won so much money in the lottery, i.e., millions of dollars, staying at a job you don’t like, are indifferent about, or takes you away from your family and friends for 10 or 12 hours a day doesn’t make sense – not when you have a load of cash in the bank.

The point is, making the decision to quit your job after winning the lottery is a unique one for your personal circumstances.

That’s why it’s so important to work with a good money manager to lay out a long-term financial plan that preserves your newly-found financial capital for decades to come. Having that plan in place makes it much easier to weigh the pros and cons – outside of income needs – of telling your company you’re hitting the bricks.

Things You Should Know as a New Lottery Winner

As a newly-minted lottery champion, you’ll likely also have many questions to ask. That’s a natural occurrence for someone who’s never experienced dealing with a new flood of cash pouring into your life.

These questions are likely a priority. Let’s answer them and keep you, the new but likely under-informed lottery winner, in the know.

How Soon Can I Get My Money?

That’s basically up to you, as a lottery winner. Technically, you’ll receive the money after you turn in the winning ticket – it can be deposited into your bank account in a matter of 24 to 48 hours in most state lotteries.

You may, however, hold off on being paid off until you’ve worked out a thorough financial plan that minimizes taxes and maximizes your total take-home pay. That means working with a financial adviser to lay that plan in place – a process that could take days or even weeks.

How Will I Be Paid?

Most states give lottery winners the option of being paid via regular check or by electronic deposit. The latter is a more secure and faster way to get paid, although a good case can be made to be paid by either method.

How Much Will I Pay in Taxes?

Your state lottery agency will walk you through your tax obligations when you turn in your ticket and your winning numbers are verified.

Each state likely has a different tax rate, usually from 30% to 50%, depending on where you reside (the federal government will take its cut, too). Again, have an accountant or money manager lay out a plan first before you accept the money to minimize your lottery cash tax burden.

What if I Win a Lottery In a Different State?

There’s no law that says you can’t play a lottery in a different state and win it. In fact, many lotteries are open to players in other U.S. states – it beefs up the number of players and the amount of money to be paid out to the lottery winners.

If you win as an out-of-state lottery victor, prepare to pay taxes based on the state where the lottery was held. You may have to pay taxes in your home state, too. But if you’re lucky, you live in Texas, Florida, South Dakota, Wyoming, Washington, New Hampshire, and Tennessee – states with no state income taxes for residents.

Be a Smart Lottery Winner

To maximize your lottery winnings, take a deep breath or two, keep your head about you, resist the urge to spend it lavishly and immediately, and follow the tips listed above.

Do all that and your lottery winnings will be around for the long-term – for you and your loved ones to enjoy.

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Life after winning the lottery isn’t as easy as you would think. Keep calm and take these immediate action steps if you win the lottery.