BEST WAY TO CLAIM YOUR LOTTERY WINNINGS?
Lottery Winners Should Form A Blind Trust To Claim Winnings
Susan Bradley, certified financial planner and sudden money expert,
on winning the lottery. One of the first things a lottery winner should
do in a perfect world is not claim the ticket in their name. You can
form a blind trust, and you can have the lottery winnings put into
What Winning Lottery Is Really Like
Winning the lottery isn't always what it's cracked up to be, says
Evelyn Adams, who won the New Jersey lottery not just once
but twice (1985, 1986) to the tune of $5.4 million. Today, the
money is gone and Adams lives in a trailer. I won the American
dream but I lost it, too. It was a very hard fall. It's called rock
bottom, says Adams. Everybody wanted my money. Everybody
had their hand out. I never learned one simple word in the
English language -- 'No.' I wish I had the chance to do it all over
again. I'd be much smarter about it now, says Adams, who also
lost money at the slot machines in Atlantic City. I was a big time
gambler, admits Adams. I didn't drop a million dollars, but it was
a lot of money. I made mistakes, some I regret, some I don't.
I'm human. I can't go back now so I just go forward, one step
at a time.
Do Not Spend It Before You Get It
These sad-but-true tales are not uncommon, experts say. For
many people, sudden money can cause disaster, says Susan
Bradley, a certified financial planner in Palm Beach, Fla., and
founder of the Sudden Money Institute, a resource center for
new-money recipients and their advisers. In our culture, there
is a widely held belief that money solves problems. People think
if they had more money, their troubles would be over. When a
family receives sudden money, they frequently learn that money
can cause as many problems as it solves, she says. Craig
Wallace, a senior funding officer for a company that buys lottery
annuity payments in exchange for lump sums, agrees. Going
broke is a common malady, particularly with the smaller winners.
Say you've won $1 million. What you've really won is a promise
to be paid $50,000 a year. People win and they think they're
millionaires. They go out and buy houses and cars and before
they know it, they're in way over their heads, he says.
Here's what the experts have to say
If you win, take the lump sum, says Craig Wallace, a senior funding
officer for a company that buys lottery annuity payments in exchange
for lump sums. People are far better off taking a lump sum and
investing it than taking the annuity. It's bad for my business, but it
is definitely the way to go. If you choose the annuity, what you're
choosing is a fixed amount of money a year for 20, 25, even
30 years down the road. In some states the money will escalate
somewhat. For example, in Colorado, the money grows at
3.7 percent a year on a 25-year payout. In Florida, the payments
are stretched out for 30 years, that's the worst in the country,
he says. You are subject to a change in the tax rate. You know
what the tax consequences are now, but you don't know how it
will change. The value of your money decreases over time.
I wouldn't take that bet. Take the lump sum. That's definitely the
way to go. You're better off investing the money and taking
charge of your own destiny.
How to Find a Financial Adviser
* Interview at least two to three financial planners, preferably a CPA
or CFP, before deciding who to work with.
* Ask a lot of questions of the person you are about to entrust with
your assets. (How many financial plans have they prepared, how
are they paid, etc.)
* Get a list of three professionals who have worked with the planner.
Call the professionals and ask about the planner.
* Once you make your choice, spend time getting to know your
planner. Be certain he or she has committed both orally and in
writing to what you have asked of him or her. CPAs and attorneys
call this an engagement letter. If the planner is too busy to spend
much time with you or doesn't use a formal questionnaire to
gather information from you, walk out of the office.
* Don't rely totally on the planner. Learn how to budget your money.
One good tool is the groundbreaking book, The Millionaire Next Door,
by Thomas J. Stanley and William D. Danko.