Win the lottery? How to manage the windfall
For everyone who's ever dreamed of winning big, it's hard to imagine that hundreds of millions of dollars brings new challenges – but it's true. Here's how to weather the money storm.
A chance to split a $380 million jackpot. Where's the problem in that?Skip to next paragraph
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Sure the money will change the lives of the Mega Millions lottery winners, but it's imperative that they have a sound financial plan. Failure to map out a strategy for their winnings could lead to misery.
The delay in coming forward after Tuesday's drawing means the winners are likely following the first prudent step for anyone suddenly coming into lots of money — keep quiet until you figure out what you're going to do with it.
Although winning the lottery is one of the more glamorous ways to attain sudden riches, there are several ways to come into a cash windfall: Inheriting money, receiving proceeds from a life insurance policy or selling a business, are far more common.
Whatever the circumstances, planning is essential.
Many people think having a fortune means financial worries and planning are over, said Charles Mayfield, a financial planner at Atlanta-based Chappell, Mayfield & Associates. "That couldn't be further from the truth."
Although it's fun to think about winning millions upon millions, Mayfield said the typical windfall he sees is an inheritance between $500,000 and $2 million.
The first thing one should do is keep quiet and not get carried away with excitement.
Next it's important to determine the best immediate use for the money, which usually means paying down debt.
Then it's a matter of seeing how the money can best be put to work.
If the person has adequate retirement savings, then it's acceptable to entertain some of the items that may be on a wish list, like a vacation home.
And it's essential to think long term. Any discussions about how to handle a windfall must include proper estate planning.
To help create a plan it's wise to invest the time and money required to assemble a team. That should include an attorney, an accountant and a financial adviser.
"What it will boil down to is finding trusted advisers they can speak candidly with — and that goes for any amount of money," Mayfield said.
Winners without personal relationships with such professionals may find it difficult to place their trust in people they don't know. Relying on recommendations from family members and friends helps.
Organizations such as the National Association of Financial Planners and the National Association of Personal Financial Advisors can also provide referrals.
It's important to get references and choose someone who's easy to talk with. It's also a good idea to make sure they've been in business for at least 10 years, said Myra Salzer, founder of The Wealth Conservancy, a wealth management firm based in Boulder, Colo.
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