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What To Do If You Win The Lottery

Chris Gottschalk

Chris Gottschalk About The Author

Dec 25, 2018 6:31:00 AM

what to do if you win the lottery | how to manage your money after winning the lottery | first alliance credit unionYou probably know that winning the lottery is a pipe dream. You’re more likely to be struck by lightning than win the lottery, and you also know that investing your money wisely will eventually give you a better return than you’ll ever get from a lottery ticket. However, there is one dirty secret about the lottery. It’s something very few people want to think about.


The worst thing that can happen to you while playing the lottery isn’t that you’ll lose—it’s that you’ll actually win.

As it turns out, getting millions of dollars creates as many problems as it solves. This is especially true if you don’t have experience handling that kind of money.

Around 70% of lottery winners have to declare bankruptcy within five years. Even if you don’t go broke, you’ll have to deal with pressures you never dreamed of. Most of that will come from your friends and family, who will come to see you as less of a human being and more of a piggy bank.

what to do if you win the lottery | how to manage your money after winning the lottery | first alliance credit union

You’ll also have to deal with an endless parade of acquaintances and strangers begging you to donate to charities, political candidates, colleges, building renovations, foundation drives and countless other causes. You might feel a little better knowing that most of these people are sincere, although you’ll encounter your fair share of con artists.

Other people might try to take your money without your consent. A disturbing number of lotto winners have been kidnapped, robbed or even murdered, sometimes by a family member wanting their inheritance a little too early.

Knowing all this, you may wonder if anyone who wins the lottery actually gets to be happy.

The answer is that some people manage to thrive with their newfound wealth. You can too, but you have to be smart, modest and very responsible with money.

First Steps If You Win the Lottery

So let’s say you win the lottery. What should you do? Buy a round of drinks for everyone at the bar? Walk into your boss’s office and quit in the most obnoxious way possible?

Don’t do any those things. The first thing you should do after you find out you’ve won the lottery is nothing. Don’t let anyone know.

Instead, take a day or two and research attorneys. You’ll want to get a lawyer from a large national firm, one with experience handling trusts and estates. You may be tempted to go with your family’s lawyer, but you want an impartial attorney who knows how to set up a trust where you can put your newfound wealth.

what to do if you win the lottery | how to manage your money after winning the lottery | first alliance credit union

Collecting Your Lottery Prize

Once you have a trust set up, read up on the rules about collecting the prize. Your best bet is to have your new attorney collect the prize as a representative of your trust and stay out of the spotlight as much as possible.

If you do have to accept the prize personally, try to disguise your appearance. Grow a beard, change your hairstyle and wear a hat or head scarf if at all permissible. Remember that your goal is to remain anonymous when collecting your lottery winnings.  Also be sure to get a P.O. Box where all correspondence to you can be sent.

When you get the prize, you can choose to have it presented as a lump sum or receive an annual annuity for several years. Always elect to get the lump sum, and place it in a trust.

If you elect to go with the annuity, the government will invest your money in U.S. Treasury instruments with interest rates that will barely beat the inflation rate. You can easily beat that. The only time the annuity option is preferable is if you know you have an addictive personality that will absolutely burn through your winnings once you have them.

When you get your prize, don’t be surprised if it’s a lot lower than what was advertised. You can expect to walk away with about 46% of the total winnings if you take the lump sum, due to the way the lottery prize is structured. You’ll also have to pay 33% of the remaining amount in taxes, possibly more depending on your state’s tax collection rate. At this point, you may be feeling cheated, but don’t be—you still have a few million left.

Post-Prize, Pre-Spending Phase of Winning the Lottery

The taxes have been collected, and you’ve got a few million in cash you didn’t have before. Now’s the time you purchase the mansion and million-dollar sports car you’ve always wanted, right?

Wrong. Before you start spending, you’ll need to allocate your funds.

You may be wondering why you have to allocate funds (or budget) if you’re a millionaire, and the answer is that you, like 99% of the population, have no idea what that kind of money can and cannot do.

To make sure you spend your money wisely, hire an accountant. You’ll need one who is used to dealing with millions of dollars.

You’ll also want to hire a financial advisor to help you invest the money, but you’ll need to do so with caution. You will be swarmed by almost every financial manager in the United States, all of whom will have a surefire way to increase your money by investing in funds that have really cool acronyms and can show you very convincing PowerPoint presentations accompanied by documents thicker than a Tom Clancy paperback. Stay away from them, and instead select a financial advisor who will only invest in what you want them to.

Make Your Money Work for You First

Now you’re ready to allocate funds.

The first order of business is to get yourself set up for the rest of your life. Take a look at 10 year U.S. Treasury notes, which you can buy at a credit union or other financial institution, and which usually yield around 3% returns per year. That means if you put in $34 million, you should get a little over $1,000,000.

what to do if you win the lottery | how to manage your money after winning the lottery | first alliance credit union

This is one of the safest bets you can make, since if the U.S. defaults on these notes, you will have a lot bigger problems than getting your money back. If you’re extremely cautious, you might want to look at investing some money in Swiss Government Bonds . They do not pay as much (if any) interest as a U.S. Treasury bond, but if those bonds fail you’ll be too busy dealing with the collapse of civilization to care.

Now that you have a safety net most people can only dream of, you might want to set aside some money for your friends and family. Select an amount that you’re comfortable with, but remember you don’t actually owe them anything. Also, you should NOT consult with friends and family on how much you should set aside, unless you really want to foster bad feelings and set yourself up for a lawsuit or two.

The best thing you can do is take the money you’re going to share with friends and family and put it in a separate trust that is empowered to fund things like higher education, help with purchasing a home, and perhaps even help in funding significant events like weddings.

What do you do with the rest of your money? If you’ve gotten a prize with a lump sum of $100 million after taxes, by now you’ve invested $34 million in your safety net, and probably around $10 million in the friends and family trust, which is incredibly generous.

This leaves you with $54 million dollars, and while you should invest most of that money, too, here’s where you get to start exercising some personal discretion. Your best bet is to follow Warren Buffet’s example and put it in an index fund. You’ll get about a 7% return over the next ten years. You don’t have to invest in an index account, though. You might also want to invest in a business, or in real estate. Both of those are good ideas, but again, be sure you’re investing wisely.

Going back to our $100 million example, let’s say you’ve invested $40 million of your remaining $54 million in the stock market or in business. That leaves you with $10 million that you can spend however you want. You’re taken care of financially for the rest of your life, so feel free to buy whatever you want now, from sports cars to islands to joining high-stakes poker games with individuals who look remarkably like James Bond.

You can even use this to finance some kickstarters or startups you think need the help. Again, though—do NOT do this for anyone you know. It never ends well, and it can only lead to bad feelings and lawsuits.what to do if you win the lottery | how to manage your money after winning the lottery | first alliance credit union

If any of this makes you feel uneasy about winning the lottery, don’t worry—your chances are still as remote as they have ever been. Instead of trying to win the lottery, though, you’ll probably get a better return on your investment if you spend your money on something else instead. You can put your money into a Certificate of Deposit (CD) to generate interest, for example, or even put it into your checking account so you can make a down payment on your next auto loan.

Check the rest of the First Alliance Credit Union blog, too. Each post offers solid, practical advice on how to manage your money. You probably won’t become a millionaire, but you will learn to manage the money you do have more effectively.


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