You just won the Powerball jackpot! Congratulations! You are likely feeling a mix of shock, disbelief, joy, anxiety and overwhelm. Winning hundreds of millions of dollars will dramatically change your life. While it’s normal to feel overwhelmed right now, there are some important steps you should take immediately after winning to protect yourself and properly manage your newfound wealth.
Claim Your Prize
The first thing you’ll want to do is claim your prize. Powerball winners have two options for collecting their jackpot:
Cash Option
You can take a one-time lump sum cash payment equal to the jackpot’s cash value. This will be a smaller amount than the advertised jackpot, as it represents the amount of money available right now from the prize pool. For example, if the jackpot is $500 million and the cash value is $300 million, you could take the $300 million lump sum.
Annuity Option
You can receive your winnings in annual payments over 29 years. For a $500 million jackpot, you’d get about $17 million per year for 29 years before taxes. This allows the prize money to accrue interest over almost three decades.
You’ll need to decide which option better aligns with your financial goals. Do you want immediate access to a large chunk of cash, or guaranteed income over time that you won’t outlive? Consult financial advisors to determine the best route.
Once you choose, contact your state lottery office as soon as possible to begin the claims process. They’ll walk you through the steps, which involves filling out paperwork, getting a lawyer and financial advisor, and more. Act quickly, as there is usually a short time frame to claim.
Assemble a Team of Advisors
Managing several hundred million dollars requires professional help. As soon as possible, you’ll want to assemble a team of experienced advisors to provide financial, legal and other guidance. This is crucial for properly managing your money, minimizing taxes and avoiding scams or bad investments. Your team should include:
Financial Planner
A fee-only certified financial planner (CFP) can help you invest wisely, set budgets, plan your estate and more. Make sure they are a fiduciary obligated to act in your best interests. Ask about their experience with major windfalls.
Accountant
An accountant experienced with high net worth individuals can advise you on minimizing taxes when claiming your prize, investing, setting up trusts and making charitable donations. Complex tax implications arise when coming into large sums of money.
Lawyer
Hire a lawyer to help you navigate legal issues and set up entities to protect your anonymity (see next section). Find someone experienced with estate planning, trusts, and wealth management.
Insurance Agent
An insurance professional can help you evaluate needs for health, life, disability, and liability insurance. With great wealth comes greater risks, so review your coverage.
Take time to find advisors you trust and can easily communicate with. Interview multiple candidates before deciding. Expect to pay for quality but be wary of excessive fees.
Protect Your Privacy
One major concern when winning the lottery is loss of privacy. Having your name publicized puts you at risk for harassment, scams and unwanted requests for money. To maintain privacy:
Remain Anonymous
Some states allow lottery winners to remain anonymous. If so, claim your prize through a trust rather than individually. Even if anonymity is not allowed, limiting publicity helps minimize risks.
Set Up a Trust
Have your lawyer help establish a trust to claim the money on your behalf. A revocable living trust keeps assets private and avoids probate. An irrevocable trust also provides some asset protection from lawsuits.
Claim as a Group
If you bought the ticket in a lottery pool, have the prize claimed in the name of the group rather than individuals. This helps keep identities private. Make sure to have a contract detailing the distribution of funds.
Manage Publicity
If you cannot remain anonymous, work with professionals to release a general public statement without excessive detail. Limit press interviews, share bare minimum about yourself or plans, and refuse to pose for publicity photos.
Avoid Splurging Too Fast
It will be tempting to spend your newfound riches on luxury purchases immediately. Fight this urge. Take time to let your winnings sink in and make a long-term financial plan before making any large purchases or investments. Some tips:
Pay Off Debts
One smart early move – pay off any outstanding debts like credit cards, loans or your mortgage. This instantly boosts your net worth.
Delay Major Purchases
Hold off buying expensive items like a new house, car or boat right away. Take time to understand all your options and make careful selections aligned with your goals.
Invest Conservatively
Park your money in safe, liquid investments like savings accounts and certificates of deposit initially. Avoid risky investments you don’t fully understand. There’s plenty of time to diversify.
Set a Budget
Work with your financial planner to create a budget covering your basic living expenses, taxes, philanthropic goals and savings. Sticking to it helps prevent overspending.
Give yourself time to adjust to your new financial reality. Make decisions from a long-term perspective.
Be Wary of Requests for Money
Word will spread quickly about your Powerball winnings. Unfortunately, this means you will be bombarded with requests for money from seemingly every person you’ve ever known. Long-lost relatives, old friends, charitable organizations and scammers will come calling.
Say “No” More Often
Get comfortable turning down requests. The more you give, the more people will ask. Set limits and stick to them. Don’t feel pressured to share your wealth.
Vet Requests Thoroughly
Do your diligence if considering a major gift or investment. Ask for detailed proposals, financial statements, references and time to review. Make sure recipients are trustworthy and legitimate.
Give Quietly
Consider making anonymous donations to causes you care about through donor-advised funds. Being public with your giving spur further requests.
Use a Team Approach
Have your advisors, especially your lawyer and financial planner, evaluate any significant funding asks. They can help determine if it aligns with your objectives and spot potential issues or scams.
While it’s great you can now support causes financially, be strategic about distributions. Setting processes protects your assets.
Plan Your Estate
A primary benefit of winning the lottery is having the freedom and resources to decide how you want your wealth allocated after you pass away. To ensure your assets go where intended, early estate planning is essential. Key steps include:
Drafting a Will
Work with an experienced estate planning lawyer to prepare a Last Will and Testament detailing how you want assets distributed and who will administer your estate. Provide for immediate family first before considering charitable gifts.
Setting Up Trusts
Trusts let you control how beneficiaries access funds. Options like marital trusts, family trusts and special needs trusts can provide ongoing income, while minimizing estate taxes
Naming Beneficiaries
Update all beneficiary designations on retirement accounts, life insurance policies and annuities to align with your current wishes. Avoid listing minor children as direct beneficiaries.
Making Gifts
You can reduce future estate taxes by making annual tax-free gifts up to the gift tax exclusion amount (currently $16,000 per recipient). Larger gifts may require filings and reduce your estate exemption.
Consult an estate planning lawyer when establishing your plan to ensure it follows all state and federal regulations. Review your plan regularly and update as needed based on life changes.
Continue Working
You may be tempted to quit your job immediately after winning Powerball, imagining living a life of luxury and leisure. However, continuing to work – even if just part-time or in a reduced capacity – has advantages you should consider. Some benefits include:
Keeping a Sense of Normalcy
Continuing daily work routines provides structure and purpose that can be lost with sudden wealth. Work often provides social connections and stimulation as well.
Staying Grounded
Working helps maintain a connection to ordinary life experiences. This prevents getting entirely caught up in an affluent new bubble. Interacting with colleagues can keep you humble.
Using Your Skills
Instead of fully retiring, consider ways to transition your career that allow you to use your knowledge and skills to contribute positively, whether through launching a passion project or getting involved with charitable initiatives.
Setting an Example
Serving as a role model that you don’t have to quit working just because you become wealthy sets a good precedent, especially for children or grandchildren inheriting money.
Talk to your financial planner about how continuing to earn income could impact your goals. For many lottery winners, keeping some type of job leads to greater long-term fulfillment.
Help Loved Ones Wisely
Sharing your lottery fortune with close family and friends may be high on your priorities list. Be cautious in how you provide financial assistance. Sudden access to wealth can do as much harm as good if not managed prudently. Some guidance:
Set Limits
Be upfront about how much or little you plan to give loved ones. Make sure it aligns with your wealth plan. Define expectations so you don’t become an endless bank.
Offer Advice, Not Just Money
Provide guidance to help family make wise financial choices. Teach budgeting, investing and smart spending habits. Give them the tools to manage windfalls responsibly.
Pay Tuition, Don’t Handout Cash
Consider paying for education, medical bills and secured assets rather than cutting checks. This removes temptation for misusing lump sums and ensures your gifts are used productively.
Maintain Privacy
Be discreet in how you share with family. Flashing money around can disrupt relationships and make your loved ones targets for security risks or requests themselves.
Philanthropic intentions toward relatives and friends are admirable, but avoid “trust fund baby” outcomes by making gifts thoughtful and purposeful.
Get Financial Education
Entering the world of the financial elite requires quickly getting up to speed on topics like wealth management, investing, tax strategies and estate planning. Some education options include:
Read Books and Articles
Pick up books and publications focused on finances and wealth. Reading in your spare time helps build knowledge. Stay up to date on current best practices.
Take Courses
Enroll in courses at a local college or university to build financial acumen, like on investing, money management and retirement planning. An educated winner avoids major pitfalls.
Attend Seminars
Look into attending financial education seminars and events for high net worth individuals. These provide overviews on key wealth management issues to be aware of.
Meet with Advisors
Have regular meetings with your financial, tax and legal advisors. Use these sessions to ask questions and learn as much as possible, so you can make informed decisions.
Make developing financial literacy a priority. Learning allows you to better leverage your windfall and avoid foolhardy choices.
Maintain a Low Profile
Winning hundreds of millions instantly puts you in the public spotlight. For your safety and privacy, maintaining a low profile going forward is crucial. Consider these tips:
Keep Existing Home
Stay in your current residence initially if possible. Moving into a lavish mansion right away draws unwanted attention. Keep wealth on the down low.
Hold Off on Luxury Purchases
Resist the urge to run out and buy fancy cars, jewelry and other status items. Quiet understated luxury helps avoid marking yourself as an overnight millionaire.
Remain Humble
Continue living relatively modestly. Lavish displays of wealth attract scams and jealousy. Carry yourself without an air of superiority.
Avoid Press and Social Media
Turn down media interview requests politely but firmly. Limit posting details about your win online. Maintain as much anonymity as you can.
Keeping a low profile takes advantage of the financial freedom and security of your winnings while minimizing unwanted attention and disruption to your life.
Don’t Rush Major Life Choices
Coming into a financial windfall empowers you to make big changes – quitting your job, moving across the country, getting married, having kids, or divorcing a spouse. Be very cautious about making any major life choices too quickly following a lottery win.
Wait a Year Before Making Big Moves
Give yourself time for the reality of your winnings to settle in before turning your whole life upside down. Significant decisions should be well-planned, not reactionary.
Pay Off Mortgage First
If looking to buy a new home, pay off your existing mortgage first. This provides financial stability as you take your time assessing options. Don’t rush into an expensive new property.
Consult Your Support Team
Discuss any thoughts about changing jobs or relationship status with advisors first. They may provide valuable perspective on how these choices align with your financial game plan.
Think Long-Term
Carefully evaluate the long-term impact of any life change before acting. Will that move really lead to happiness years from now? Will quitting your job feel rewarding forever? Take time to evaluate.
Avoid letting sudden wealth cloud your judgment. Major shifts will still require thoughtful deliberation and diligent preparation.
Give Back
Philanthropy is a great way to use some of your lottery winnings to help make a difference and leave a positive legacy. If giving back is one of your goals, here are some tips:
Define Your Passions
Decide what causes align with your values and interests. Do you want to support education, healthcare, the environment? Focusing your efforts amplifies impact.
Research Effective Charities
Look into nonprofits addressing your causes. Analyze track records, leadership and financials to verify they use donations wisely. Sites like Charity Navigator help.
Consider Establishing a Foundation
Creating a family foundation allows you to direct grants based on priorities and establish a legacy of giving. This requires greater upfront investment and administration.
Give Anonymously
For substantial donations, set up donor-advised funds or private foundations which allow you to distribute money without using your name publicly. This maintains privacy.
Use your wealth to positively impact the world. Just be strategic in assessing how you can provide the most effective support.
Conclusion
Winning the lottery provides amazing opportunities, but requires disciplined planning and guidance to avoid risks like excessive spending, scams and unwanted publicity. Take time to let your winnings sink in. Build a team of trusted advisors. Make careful financial and life decisions from a long-term perspective. Invest in financial education. Protect your privacy. Give back thoughtfully. With prudence and patience, your windfall can provide incredible benefits for you and those around you for decades to come.
