You Won the Lottery! What Should You Do With the Winnings?
Posted on: 22 February 2016
If you happen to be so fortunate to win the lottery, then you need to be prepared for how to handle the financial windfall. There are to many horror stories about people winning jackpots and then going broke soon after. Even outside of the lottery, you see this pattern in the sports world and entertainment world. People will manage to spend or mishandle millions of dollars and end up broke. So, below is some guidance about what to do should you win the lottery to avoid that nasty fate.
Hire Experts
The first thing to do with your money is to consult experts. A wealth management firm is exactly the place to go if you're suddenly in possession of millions of dollars. Private wealth management firms are companies that handle the personal finances of high net worth individuals. Rather than dump the money into a savings account, or deposit it to a brokerage account and try and pick your own stocks, it is much wiser to seek the guidance and wisdom of the experts at a wealth management firm.
At a wealth management firm you will have personal attention. Financial experts will tailor a strategy to your own personal goals, situation, and comfort level. They are used to handling the special needs of people with huge sums of money (tax implications, specialized investment products, and legal trusts.)
Design a Proper Investing Strategy
A wealth management company won't simply take your money and leave you in the dark. You will sit down and have conversations about the investment strategy that is right for your situation and make your own choices with their guidance.
As a lottery winner, your situation is a bit different than some other high net worth individuals. For instance, someone who owns several hotels, and might have the same net worth as yourself, is in a different situation. They have working assets that will continue to produce income for both them and their families for years to come. You, on the other hand, have only the lottery winnings. Therefore you need a much different strategy.
The proper strategy for you, as a lottery winner, is to protect your assets. You will need to be more conservative than someone who has a high cash flow. This means you should focus on triple A rated corporate bonds, municipal bonds, and blue chip stocks. You should avoid small, speculate stocks and junk bonds.
Develop a Trust
Finally, you will need to develop a trust. This is something that the experts at a wealth management firm can help you with. A lawyer will need to draw up the papers; the trust will protect the money for your beneficiaries. The main financial benefit is that it will avoid an expensive inheritance tax. Secondly, the trust can be set up to dictate how much is distributed, and a time basis for the distribution. This will prevent any winnings from being spent haphazardly by beneficiaries who have less financial prudence than yourself.
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