what would i do if i won 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.

7 things I would do if I won the lottery

What I would do if I won the lottery is probably not what you would expect.

Before I get into that, a few words about lotto first.

In America, there’s just about every type of lottery draw game you can think of. Some jackpots are small, others are large, and then you get the super-large stuff.

What qualifies as large is anything over $1 million dollars. The super-large is when it goes over $10 million.

Some years back, lottery organizations banded together to offer multi-state games, and that’s where the super-large games started happening. The two that are recognized the most are Powerball and Mega Millions.

Powerball at the time I write this has a drawing this Saturday of $203 million, and Mega Millions has a draw next Tuesday of $15 million.

There are a few US states that have state-run lotteries in super-large territory, and Florida, the state I live in, is one of them.

Florida first started offering lottery sales in 1988, and the state-run game that commands absolutely insane money is a draw game Florida Lotto. That game paid out its first $100+ million prize in 1990. Total prize was $106.5 million and there were 6 winners.

This Saturday’s drawing at the time I write this is for $44 million.

How bad does one get screwed winning the jackpot in Florida?

Before listing off what I’d do if I won the Florida Lotto jackpot, here’s a few interesting things about what you actually keep as a winner.

Let’s say I play for Saturday’s drawing and win the $44 million.

Do I get the entire $44 million? Nope. Not even close.

First, I would opt for the cash option, which most people call a lump sum. You get a huge whack right there off of what you win.

After that, there’s a 25% federal withholding that is automatically taken out.

And after that, there’s 14.6% left in federal income tax to pay on those winnings. And no, it does not fall under capital gains, so you have to pay the full monty.

Why 14.6%? Because the highest possible federal income tax rate is 39.6%. Take 39.6, subtract 25 and you have 14.6. And yeah, it is required to hire a tax attorney to figure all this crap out. But fortunately, Florida currently has no state income tax, so there’s no more tax after that.

Why doesn’t Florida just take out the entire 39.6% to begin with? I have no idea. I’m sure there’s a reason why FL does 25% and not 39.6%, but I’ve no clue what that reason is.

In the end, after the cash option whack and the federal tax whack, the winner keeps about 34% of the original prize money. That means from the original $44 million, you end up with roughly $15 million.

Granted, $15 million is a ton of money and obviously is a set-for-life figure. But still, to start at $44M and end up with under $15M. yeah. Talk about getting screwed.

Here are the 7 things I’d do with my winnings.

1. Buy several million-dollar insurance policies

It’s a sad and very weird state of affairs when an insurance policy is actually worth more and is more acceptable than real cash, but that’s the way the modern world works.

From health to dental to vision to auto to homeowner’s and everything in between, having expensive “covers everything” insurance policies not only protects and insures but also allows me to buy more than I could with straight cash.

Small example: These days, when you go to any vision place, they expect you to pay using nothing but insurance. When you pay on plastic, they give you a funny look as if you’re a man from Mars. And if you dare pay in straight cash, they really give you a funny look, as if to say, “What are those green pieces of paper with numbers on them? That’s what. cash? What’s cash? I don’t know if we can accept that..”

2. Buy a Volkswagen Jetta with extended warranty

When people dream about winning the lottery, sometimes the thought of buying fancy cars comes to mind.

I may buy a few fancy cars, but the first car on the list is the Jetta. Yes, the Jetta is a boxy, plain-jane car that obviously wouldn’t get me laid. But it’s a sedan that’s comfortable, designed well, isn’t a high target for theft, gets good gas mileage and has a real, usable trunk.

See, here’s the thing. As a millionaire, I still have to drive and get around because I’m not about to take a limo everywhere when I can just get in a car and drive somewhere myself. That, and going to the supermarket in a limo is pretty stupid. I’m not about to take a $60,000+ BMW to the Publix parking lot where it’s sure to get door-dinged and probably keyed by someone. Better to just get a Jetta and blend in.

3. Buy a vintage Fender Jazzmaster guitar

This is something I would only buy as a millionaire. They run between $4,500 to $6,000.

If you know vintage Fender electrics at all, you know that’s actually quite a bargain for a real-deal mint condition 1960’s Fender electric guitar. The reason they’re so “cheap” is because most guitar guys don’t like Jazzmasters.

I would probably also buy a vintage 1960’s Fender amplifier to go along with it, just to “have the set,” so to speak.

Do I need the guitar? Nope. It’s like I said, it’s something I would only buy as a millionaire just because I had the cash to spend.

4. Become a snowbird

A snowbird is a Florida resident who only lives in Florida during the winter months, while during warmer months lives elsewhere in America.

For me, I’d own two houses. One here in Florida and the other somewhere in southern New England. Probably Rhode Island either in or near the town of Narragansett, which is without question a snowbird town. I’d fit right in.

I would keep my primary residence in Florida, but I figure that I’d be in RI from May until November, then be in FL from December until April. Five months FL, seven months RI. I wouldn’t set that in stone, but that would be the basic idea.

5. Go on “photo runs”

This is where I’d really pile the miles on the Jetta.

I like photography, and I would buy some seriously good camera equipment. As for what I’d do with that equipment, I would travel all across America taking photos everywhere I could in the most scenic areas.

An example of this is the Blue Ridge Parkway. I’ve never been there and one day want to go. When I do, I want some seriously good camera gear along for the ride.

Another thing I’d like to do is a Route 66 run. Lots of stuff to see, and I’d take full advantage of it.

Every state in America has something worth seeing, and I would like to try to photograph it all. It would take years to do, but I’d obviously have the time.

6. Hire a private jet to go somewhere

Companies like JetSuite do this. I would never own the jet because that’s stupid, considering I don’t know how to fly or even where the park the thing. But as a millionaire I’d like to hire a jet to go somewhere at least once so I could have the experience.

As for where I’d fly to, I’ve no idea. Somewhere fun. Find a girl, take her on a date, then just ask all nonchalant-like, “Would you like to take the private jet?” Yeah, I’m pretty sure that would get me laid. That makes up for the Jetta not getting me laid. 🙂

7. Visit other countries

The top 3 on my list to visit first are Canada, Tasmania (yes, I know Tasmania is technically a state and not a country) and New Zealand. After that comes Australia, England, Scotland and Ireland.

Do I want to visit anywhere else? Not really, being I only speak English.

What would I do in those countries? Same thing I do in America. Go on photo runs.

I have been invited to other countries by fans of mine. The only reason I don’t take them up on their offers is because I can’t afford the trip. But as a millionaire, then I could afford it.

(Bonus) 8. Put on a few large music performance concerts

Ruth Eckerd Hall in Clearwater is the place I’d go to do this. I could put the word out that I’d need a few musicians, put together a show and just outright rent the place. I’ve been to that hall a few times, and it’s a classy house that I’d love to perform in.

It’s probably true that any concert I perform there would make no money, and that’s fine. I’d just like the experience of being able to play there, even if I had to pay for the whole venue myself.

My favorite concerts I’ve attended have always been the kind that are in places like REH. It is a traditional hall where the acoustics are incredible and there’s pretty much not a bad seat in the house.

REH has 2,180 seats total. That’s big, but not gigantic. And I don’t want gigantic. Even with 2,000+ seating, you get a good sense of intimacy when seeing shows at REH. That hall was definitely designed right, and that’s why I’d love to play there.

7 things I would do if I won the lottery What I would do if I won the lottery is probably not what you would expect. Before I get into that, a few words about lotto first. In America, ]]>