9 Smart Moves for Lottery Winners

Beating incredible odds, you’re holding a winning lottery ticket in your sweaty-hands. Your heart is racing. You’ve checked the numbers more times than you can count. What should you do? Breathe. We spoke with several investment advisors and attorneys to find out the top advice for lottery winners, and we share their advice here.

To start, they advise that you don’t make any life changes right away. In fact, keep quiet about your winnings until you have had time to think through the consequences of making the news public. Don’t go on a spending spree. Don’t post your windfall on Facebook. Do everything that you can to maintain your privacy because predators will be knocking at your door. 

Next, follow these smart steps for lottery winners: 

  1. Secure your ticket.Take photos and videos of yourself with the ticket, and then lock the ticket in a safe. Be careful because it’s a bearer instrument, so anyone with the ticket can claim it. (Even so, the lottery will take its time to verify the legitimacy of the claim.) 
  2. Hire an experienced estate lawyer. You will likely be overwhelmed, and an estate lawyer can help. An estate lawyer will help you figure out how many days you have to claim your prize. Equally important, they’ll determine if you can claim your winnings through a trust. 
  3. Set up a trust. Most state lotteries are required to release your name and where you live, but many allow you to maintain some privacy by claiming the proceeds through a trust. A trust can put a barrier between you and the onslaught of relatives, friends, and strangers who will want your money. Speak with your estate lawyer about setting up a revocable trust to which you can make changes as needed. Retrieve the lottery ticket and have the trustee sign the name of the trust on the back. Lock it up again. 
  4. Arrange for a media advisor. This is especially important if you cannot set up a trust as owner of the ticket. If that is the case, retrieve your ticket from lockup, sign your name on the back, and lock it up again. Then hire a media advisor to help you navigate the onslaught of the press and keep you safe. Consider using the advisor to speak for you in interviews. This will help you put some distance between the public and your prize. 
  5. Go silent. Lots of people – many of them strangers – are going to reach out to you. Protect yourself from the barrage by changing your phone numbers to unlisted, and suspend your social media accounts. Your media advisor might advise that you temporarily move out of your house. 
  6. Hire a tax accountant. This professional will help you decide whether to take your lottery winnings as a lump sum or in annuity payments. There are many factors that go into this decision, including your age and your heirs. 

For example, younger lottery winners generally go for the annuity, while older winners go for the lump sum. If you die before the annuity payments are done, your spouse could inherit the annuity without estate taxes. But if your spouse has died, your children would face a huge tax bill, which they most likely cannot pay. 

Either way, be prepared for a huge tax bill yourself. Lottery winnings are taxed as income. The federal tax on big winnings nears 40%. And, of course, there is state tax for most (some states, such as Florida, have none). With federal and state together, your total tax burden could be close to 50%. If you’re a lottery winner who is a resident alien, or citizen of another country, your tax consequences will be different. 

  1. Notify the lottery of your winning ticket. Be prepared for the press by assembling your team, including your media advisor and/or trustee. 
  2. Hire a qualified financial consultant. Do you want to travel the world? Buy real estate? Donate to charity? You’ll need to think carefully about how you want to live your new life, and financial professional will help you manage your money to achieve your goals. Even though you’re flush, you will need a budget. Working with a financial consultant and your accountant, create a savings plan that will maximize growth potential while limiting taxes. 
  3. Create a will. Now that your ducks are in order, work with your estate lawyer to create a carefully planned will or update the one that you have. 

Okay, now that your finances are in order, take another breath, and have fun! 

For information about retirement and investment services, call 781-698-2236 and take advantage of our free consultation services. Check out our Hanscom Investment Services ebrochure for tools and information on investing and retirement.†

†Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are: 

Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value

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Hanscom Federal Credit Union
Hanscom Federal Credit Union

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