Winning lottery jackpots brings a lot of excitement and confusion. Find out tips and tricks past winners used. When you win the lottery, the first thing should be signing the back of the ticket. Whoever signs it and presents an original ID can claim the prize.
What comes next after signing the ticket? Find out whether your state permits lottery winners to hide their identities. If it does, remain anonymous even after you have the money in your bank account. Lying low protects you from loved ones, acquaintances, creditors and more parties who might cling to you for the money. Additionally, the move protects a lottery winner from scammers.
What to do when you win the lottery
Now that you know the two most essential things you should do if you win the lottery, it is time for real business. A lottery winner has 180 days a year to claim the prize. The duration depends on where you bought the ticket and the state laws governing lottery activities in that location. After that, check following guidelines about what to do when you win the Powerball:
1. Look for a lottery attorney
The lottery attorney helps you realize who to trust and drop after winning the jackpot. Do not sit back and wonder, "I won the lottery; now what?" You will need a tax expert, an accountant, an insurance agent and an investment advisor. However, some of them are out there to swindle lottery winners.
Your family and other people might claim a portion of the money. Therefore, consult a lottery attorney to help you understand how the court determines lottery ownership and sharing.
The attorney's legal fee is negotiable, and a lottery winner can pay after cashing out the money. Find out from your state's disciplinary authorities complaints filed against professionals you want to hire, including the lottery lawyer.
2. Hire a tax expert before you cash the ticket
A lottery winner has two options for cashing out lottery money. Choose a lump sum or 30 annual instalments for 29 years. Since winners have 60 days from the time they claim the prize to choose the lottery cash-out option, they hire a tax professional for guidance.
You might want to take the lump sum, pay the entire tax immediately, and invest the remaining amount. Alternatively, choose annuity and pay the tax as you receive the payments.
Buy a life insurance policy to cover the estate tax bill. If you die, the family will still have money for estate tax. Tax professional weighs the pros and cons of each payment plan and does the complicated tax calculations.
3. Consult a financial advisor and accountant
Have you ever asked yourself, "if I win the lottery, where do I put the money?" You need a savings account but do not put the entire fortune in a single account. A good investment expert will advise any winner to pay off all your debts, including taxes, before anything else.
If you want financial stability, clear your mortgage and other loans to avoid paying future interests. As your financial advisor helps you make wise investment decisions, the accountant will monitor your money spending habits.
4. Invest your money
Financial experts will help you prepare a realistic investment portfolio and split it between fixed income and equities. Choose short-term investments that will boost long-term investments.
- Certificates of deposit
- Nasdaq-100 index funds
- Government, corporate and municipal bonds
- S&P 500 index funds
- Retirement savings plan
5. Do not change your lifestyle instantly
You will never go broke if you know what to do with lottery winnings. Do not go on vacations, quit your job, buy luxurious cars, or enjoy shopping sprees. Change your lifestyle at the same pace your investments are growing. Additionally, review your investment portfolio periodically and make necessary adjustments.
6. Protect your assets
Financial experts and lawyers help lottery winners protect their assets and investments. You will hate losing your estate and other business to your malicious ex-spouse, baby mamas/daddies or creditors. It would help if you used multiple asset protection strategies like:
- Asset protection trust funds
- Limited liability companies
- Accounts-receivable financing
- Umbrella insurance policy
- Employer-sponsored retirement plans
- Family limited partnerships
7. Plan charitable gifts
Use part of the lottery winnings' annuity as a public charitable deduction. Stay anonymous while making the donations to block tons of requests from NGOs and foundations. A charity donor gets up to 50% income tax relief on adjusted gross income (AGI) for making cash contributions.
Put your irrevocable contribution in a donor-advised fund and claim a federal tax deduction. However, do not list the account's beneficiaries (NGOs) for some months or years. Other charitable gifts include:
- Direct cash gifts
- Charitable remainder trust (CRT)
- Charitable lead trust (CLT)
- Pooled-income fund
- Private foundations
You made a wise decision to read what to do if you win the lottery. The information will help you avoid the pitfalls new winners get into. Do not give up now because your turn to win might be around the corner. May luck find you someday.
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Source: Briefly News