Now that the lottery has reached a record $1.4 billion, many people are rushing to buy tickets and, better yet, make plans for what to do with all of their winnings. But the dreaded “lottery curse” exists for a reason (read more here).
Many lotto players may not consider the financial responsibility, and better yet, estate planning options they could have at their disposal with the record winnings.
Here are a few handy tips to avoid the dreaded curse:
1) Safeguard your ticket: As soon as you find out your ticket is a winner, you should sign the back of it, scan yourself a copy, and move it to a secure location.
2) Remain anonymous (if permitted): Some states allow lotto winners to remain anonymous, even for a short period of time. Use this time to your advantage and begin talking with a financial planner and attorney to make sure you are protected moving forward. Some states allow trust recipients or LLC recipients to remain anonymous, so find out all your options before going public. Remaining anonymous has the obvious benefit of avoiding those unwanted calls from family, friends, acquaintances, and even strangers who are looking for hand-outs.
3) Keep your eyes on the prize: Just because you’ve claimed your earnings and remained semi-anonymous doesn’t mean your work is over. Even a large jackpot will require smart management in order to maximize your profits. You should keep in touch with your financial planner, attorney, and CPA to ensure you (and your descendants) stay rich for a long time. These experts will help you navigate risk and avoid unnecessary tax liability.
4) Review your estate plan: Most likely that Will you hand-wrote on the back of a napkin that one time won’t cut it anymore. The federal estate tax kicks in for estates valued over $5 million dollars, and could be a hefty hit to your beneficiaries. Establishing a trust, or several trusts, will help ensure privacy of your estate and avoid that large tax penalty.