steps to take after winning the lottery

10 Things To Do When You Win The Lottery

Gallery: 10 Steps To Take When You Win A Lottery Jackpot

Editor’s note: This post was updated on January 12th, 2016, to reflect the current $1.5 billion Powerball jackpot and the 2016 lifetime exemption from estate and gift taxes.

The jackpot for tomorrow’s Powerball drawing has hit $1.5 billion. If you win it, you won’t ever have to worry about money again–right?

With good money management you–and your heirs–could live handsomely for many, many years. But from the moment that you claim that prize, you will be descended upon by vultures who want a hefty helping of those winnings. And if you didn’t have smart money habits up until now, you could easily turn out to be your own worst enemy by quickly squandering the fortune. (See my post, “Thieves And Forgers Rush In Where Big Spenders Dare To Tread.”)

The first precautionary step you should take between now and the drawing is to sign the back of the ticket, says Carolyn Hapeman, a spokeswoman for The New York Lottery. A lottery ticket is a bearer instrument, she explains, meaning that whoever signs the ticket and presents a photo ID can claim the prize. So if you haven’t signed the ticket and it blows out of your hand while you are waiting for a bus, or if you show it to a buddy in a bar and accidentally leave it on the counter, you’ve lost the loot.

Here are some steps to help you steer clear of additional risks. Most of them work well for other windfalls too–for example with sudden wealth that comes from an inheritance or the sale of a business.

1. Remain anonymous if your state rules permit it. Once people know you’re suddenly wealthy, you’ll be badgered by requests for handouts from everyone from charities to long-lost friends and relatives–not to mention all the financial “experts” who will be vying for your business. So check state rules to see whether you can dodge them all by remaining anonymous.

Rules on winner publicity vary by state. In New York, for example, winners’ names are a public record. Elsewhere it may be possible to maintain your anonymity by setting up a trust or limited liability company to receive the winnings, says Beth C. Gamel, a CPA with Pillar Financial Advisors in Waltham, MA. A client of Gamel’s who won a past lottery did that, and had a lawyer claim the prize on behalf of of the trust. In South Carolina, it’s also possible to remain anonymous.

Depending on where you bought the ticket, prize winners have between 180 days and one year from the date of the drawing to claim their prize. So find out what the state rules are and plot a course.

2. See a tax pro before you cash the ticket. You have the choice between taking the prize money all at once or having it paid out in 30 installments over 29 years in the form of an annuity. With a lump sum payment, you must immediately pay tax on the entire amount, says Michael A. Kirsh, a financial planner in New York. With an annuity, you are taxed only as you receive the payments. People who have trouble controlling their spending might prefer the discipline of receiving the money as an annuity. But this payout form has other drawbacks, Kirsh notes. You will want to compare the effective yield of the annuity with what you could earn by taking the money as a lump sum, paying the taxes and investing the proceeds.

Another issue to consider is whether taking an annuity will leave your family without the cash they need to pay estate tax if you die before the 30-year period is up, Kirsh says. In such situations people typically buy life insurance policies to cover the estate tax bill. (Powerball also says in its FAQs that it will cash out an annuity prize for an estate.)

You have 60 days from the time you claim your lottery prize to weigh the pros and cons. During this time, ask advisors to crunch the numbers and help you decide which type of payment suits you best.

3. Avoid sudden lifestyle changes. For the first six months after you win the lottery, don’t do anything drastic, like quitting your job, buying a home in Europe, trading up for a luxury car or building a collection of Birkin handbags. Meanwhile, set aside a fixed amount for splurgesit’s only natural to want to celebrate your windfall.

Save the big purchases for later. For example, you could rent a house in the neighborhood where you were thinking of moving, before you make any commitments, says Guerdon Ely, a financial planner in Chico, Calif. If you need a new car, buy a budget model for now.

4. Pay off all your debts. As I wrote in my post, “The Best Investment Advice I Ever Received,” there is no better investment than paying off debts. Whether it is credit card debt or a mortgage, your rate of return equals the interest rate on the loan. With today’s abysmal yields on relatively secure investments like CDs and Treasurys, that’s especially true. When you’ve paid down a dollar of debt, that’s a dollar you no longer owe. When you invest a dollar, you can’t be sure whether it will grow or shrink.

5. Assemble a team of legal and financial advisers. In situations like this it’s very hard to know “who’s trying to help you and who’s trying to use you,” says Ely. Rather than signing on to a group of advisors that someone else has put together, he recommends handpicking your own lawyer, accountant and investment advisor, and requiring them to work together.

Carefully vet each advisor before discussing your situation. Check broker records at the Financial Industry Regulatory Authority. For attorneys and insurance agents, see whether there have been any complaints filed with state disciplinary authorities.

If you live in a small community and don’t want lawyers there to know your business, seek out a professional in the nearest large city. Names can be found on, the nationwide lawyers’ directory that you can search by location and area of practice, and on the Web site of the American College of Trust and Estate Counsel, a group of trust and estate lawyers.

In effect, the team you put together will function as your board of directors, Ely says. You can start by having a fee-only advisor put together a long-term financial plan and running it by the group for comment. Once you’ve decided on a plan, they can provide checks and balances on each other. You can ask one of them to serve as quarterback, coordinating the group effort. That person can also play the “bad guy,” declining requests from people or organizations for gifts that you don’t want to make.

6. Invest prudently. Ely recommends putting the money in safe, short-term investments and not even touching it for the first six months. Then ask your advisors is to put together an investment portfolio divided half-and-half between equities (such as stocks) and fixed income (like bonds). Don’t fall for investments that you don’t understand or that sound too good to be true.

7. Live within a budget. Especially if you’re not accustomed to having a lot of money, it may take some discipline to preserve your winnings and not go on a wild spending spree. One way to restrain yourself is to only spend income–not principal. Especially in today’s investment world, “It takes a lot of principal to generate income and once you start spending principal, the principal quickly dissipates,” says Dennis I. Belcher, a lawyer with McGuireWoods in Richmond VA.

8. Take steps to protect assets. People who are worth a lot of money need to guard against losing assets to creditors. They include everyone from disgruntled spouses and ex-spouses to people who win lawsuits against you. If people think you have deep pockets they may look for reasons to sue. “If you win the Powerball, everyone’s going to be laying in front of your car so you can run over them so they can sue you,” says Ely. It’s prudent to ensure you are not an easy target.

The best defense is to erect a variety of roadblocks that make it difficult, if not impossible, for creditors to reach your money and property. These asset protection strategies, as they are called, can range from relying on state-law exemptions to creating multiple barriers through the use of trusts and family limited partnerships or limited liability companies. It may be possible to rely on a variety of strategies, either separately or in combination with each other.

9. Plan charitable gifts. You can offset one of the additional income from your lottery winnings (or the annuity payments if you take it that way) with an annual charitable deduction. For gifts to a public charity, donors are entitled to an income tax deduction for up to 50% of adjusted gross income (AGI) for cash contributions and up to 30% for donations of other appreciated assets held more than 12 months.

If you are take the $1.5 billion prize in a $930 million lump sum, and are unable to decide between now and year-end which charities to support, it may be worth considering a donor-advised fund. With a donor-advised fund, you can make a charitable donation this year and claim a federal tax deduction for your irrevocable contribution but postpone recommendations about which charities should receive grants from the account until some time in the future. If you don’t want to be badgered by requests, see my post, “How To Stay Anonymous When You Give To Charity.”

10. Review your estate plan. If your winnings have made you suddenly wealthy, this may be the first time that you need to plan for estate tax. The 2012 tax law offers more flexibility than ever before. As of 2016, each person has a $5.45 million limit on tax-free transfers, which can be applied during life, when you die or some combination of the two. So if you want to share some of your largess with family and friends, this is the ideal time to do that. For details, see my posts, “6 Ways To Give Family And Friends Financial Aid” and “Give Your Estate Plan a Checkup.”

I’m a financial journalist and author with experience as a lawyer, speaker and entrepreneur. As a senior editor at Forbes, I have covered the broad range of topics that…

I’m a financial journalist and author with experience as a lawyer, speaker and entrepreneur. As a senior editor at Forbes, I have covered the broad range of topics that affect boomers as they approach retirement age. That means everything from financial strategies and investment scams to working and living better as we get older. My most recent book is Estate Planning Smarts — a guide for baby boomers and their parents. If you have story ideas or tips, please e-mail me at: deborah [at] estateplanningsmarts [dot] com. You can also follow me on Twitter

If you didn’t have smart money habits up until now, you could quickly squander the fortune.

What to Do if You Win the Lottery

There’s a right way of going about most things, and that includes winning the lottery.

You might want to think twice before splurging on luxury vacations or some fancy new toys. If you want to make your winnings last, you have to be smart about your next steps. But with so many winners ending up worse off than before winning the lottery, how exactly can you avoid the same fate?

In this guide to what to do after winning the lottery, we’ll show you the steps to get you through that crucial first year of becoming a millionaire. Remember, your life’s about to change, and hopefully for the better.

What to Do if You Win the Lottery

Most people buy lottery tickets without realizing the implications of being wealthy. Having lots of money is great, but it’s not all fun and games. Most people have trouble adjusting to a life of wealth and end up self-destructing. That’s why mentally preparing yourself for the life of a millionaire is important.

Accept that many changes will occur that are out of your control. Plan out a path for what you want to do and, most importantly, what you need to do. Also, prepare a contingency in case things go south. It never hurts to be a few steps ahead!

1. Sign Your Ticket

First things, first – sign your winning ticket.

We can’t stress this enough, and it’s easy enough to do – there’s no reason not to do it. Just write your full name and signature on the back of your ticket, but leave some space above it. That’s because if you decide to redeem your prize through a trust fund or other legal entity, you’ll be able to write the name of the entity above it.

Lottery tickets are considered bearer instruments, which means whoever holds the winning ticket is the winner. If you lose your ticket or if someone steals it, having your name on the ticket means that no one else will be able to cash it in without getting in trouble. Additionally, you can also take a photo or video of yourself with the ticket as further proof of ownership.

Also, it’s a good idea to keep details, records, and copies of your ticket purchase somewhere safe – in case you lose it. Some lottery commissions will still let you redeem your prize even without a ticket, but you’ll need to provide plenty of information (when and where you bought the ticket, the name of the retailer, etc.) to back up your claim.

2. Find a Lottery Lawyer

Next, we recommend getting some professional advice from a lawyer, especially if you’ve won a very large prize.

Find a lawyer who is familiar with taxes, estate planning, asset protection, and lottery laws. Ideally, you’ll want to consult with an attorney even before claiming your prize.

There’s a lot of technical stuff to winning the lottery – not to mention the amount of money at stake – and a good lawyer will help you through all legal processes involved. They can help you keep as much of your winnings as legally possible, and might even be able to find creative ways of protecting your anonymity.

Also, it just makes sense to have a legal expert on your side. Big-time lottery winners so easily fall prey to scams, lawsuits, and various crimes. A lawyer will be able to shield you from these risks, or at least minimize the damage done. Now that you’re rich (and hopefully not famous), you’ll never know who or what might come along trying to get their share.

If you’re worried about the costs of hiring a lawyer, don’t be. While they can get pretty pricey at first, you won’t be needing their services as frequently later on. After all, you’re on the verge of some very big changes that you might not be well-equipped to handle on your own.

3. Set Your Financial Goals

Congratulations – you’re rich. Now what?

Plan out what you intend to do with your prize. With millions at your disposal, there’s surely a lot of things to consider. The idea here is to ensure that you don’t end up going broke.

It’s so easy to fall into bad habits or make stupid decisions, especially when it feels like you have an endless supply of cash at your disposal. But the reality is that your resources are finite, and you have to be wise about spending it.

If you haven’t yet gotten into the habit of setting a monthly (or even yearly) budget to manage your finances, now is the time to do it. Set out your financial plan, and allocate your money accordingly.

Ask yourself: How much money do you want to earn every year? Do you plan to continue working? What are the best ways to invest so that you can continue to live out your life in comfort?

You might want to brush up on your understanding of finances, too. While we recommend professional help in managing your assets, it’s still important that you understand the underlying concepts behind taxes, interest rates, inflation, budgets, and so on.

Speaking of professionals, there are two more people we recommend hiring:

  • A financial adviser: You’ll want to work with an expert who can show you how to manage your newfound wealth. A financial adviser will help you figure out what to spend your winnings on, where to invest, and how to plan for your future. They can guarantee that your money stays safe, and continues to grow.
  • An accountant: If you’re thinking long-term – and you should be – get an account to help keep track of your finances. You should be busy growing your money or enjoying it. Leave the number crunching to someone you can depend on.

Ask your lawyer if they can refer you to people who have already worked with other lottery winners. Chances are, they’ll know the right people for you. As a whole, your team will be invaluable in guiding you through that first year of being a millionaire. The relationships you build with all of them could also prove to be beneficial further down the line.

4. Deactivate Your Social Media Accounts

Remember, the goal is to keep a low profile.

If you have an online presence on Facebook, Twitter, or any other similar platform, turn them off for the meantime. This is especially important if you don’t have a way of staying anonymous. You don’t want to make it easy for strangers to find you. And trust us, they will come looking.

Having a publicly visible profile also means that anyone who knows your name can potentially have access to even more of your personal information. All they have to do is look you up, and they can learn all kinds of details about you and those close to you. This makes you a much easier target for people looking to take advantage of your newfound wealth.

5. Change your phone number, address

Do this, before the word of your winning gets out.

Once the word of your win spreads, you can expect to hear from charities, investment advisors, friends, scammers, and all the relatives you never knew existed. You should consider getting new phone numbers for your landline and mobile and ensure you keep them unlisted. Also, go to the local post office or UPS and get a mailbox that you can use for correspondence to keep your address a secret.

While these methods don’t deter the extremely determined, they will help reduce a lot of spam calls and random people knocking on your door asking for help.

6. Find a Charity to Support

Share your good fortune.

From a financial perspective, giving away to charity has its advantages. It reduces your tax liability, and in some cases, by a significant margin. We recommend doing some research and find some causes you’d like to support, or you can take a look at our list of favorite charities to get you started.

From a moral perspective, supporting a charity is arguably the right thing to do – especially if your winnings are in the hundreds of millions of dollars. There’s a lot of good you can do with that amount of money, and you probably don’t really need all of it anyway.

Ask your lawyer for help on how to go about this step. If you don’t have a lawyer, ask for help from the lottery commission.

7. Pay Off Your Debts

Wipe the slate clean.

In many cases, any money you owe the government will automatically be deducted from your prize money. But don’t forget about other liabilities that you have: mortgages, car loans, credit card bills, etc.

Pay them all off. You want to start your life as a millionaire with a clean slate. Plus, if you somehow end up blowing through all your winnings, at least you won’t have any debts to worry about.

8. Take a Moment


Yes, it’s exciting to just quit your job or buy a new house after winning the lottery, but try not to make any big life decisions right away.

Drastic lifestyle changes like these draw unnecessary attention, and that’s something you just want to avoid altogether – at least for the first few months after your win. Also, if you rush into things, you might just end up regretting your choices later on. Now is the time for you to take a step back and really plan out what you want to do with your life.

Need some inspiration? Check out the stories of other big lottery winners to see how they’re doing after becoming rich.

9. Enjoy Your Win

We won’t hold it against you.

Finally, there’s no harm in splurging a little bit. Plenty of winners buy a new house and car soon after winning. Going on a vacation is also very common. With millions now at your disposal, now’s a perfect time to finally live out your fantasy life – within reason, of course.

Advice on What NOT to Do When You Win the Lottery

Don’t Announce Your Win

This should be obvious. Take it from Shane Missler, who won the Mega Millions jackpot and immediately posted about it on Facebook. It wasn’t long before he was caught right in the middle of a social media scandal, with hundreds of people hounding him for handouts.

It’s also a good idea to let any hype die down a bit before claiming your prize. A couple of months should be enough for even the biggest jackpots. Just don’t forget to come forward before the deadline. You can check our article on prize claim periods for all US lotteries to find out how much time you have.

Don’t Loan Money to Loved Ones

Learn to say no to family and friends asking for handouts, loans, and the like. Feel free to help some of them but be judicious. Better yet, run it by your accountant or financial adviser first. As big time investor Mark Cuban puts it, “no one needs $1 million for anything. No one needs $100,000 for anything. Anyone who asks is not your friend.”

On the other hand, if you insist on helping out your loved ones, consider offering it as a gift instead of a loan. This frees you from the burden of keeping tabs on payments and interest, which adds strain to almost any relationship.

Don’t Fall for Scams Disguised as Investments

Winning the lottery doesn’t mean you’re automatically a smart investor. People will turn to you to invest in their “business that will surely take off,” but don’t take the bait if you don’t know what you’re doing!

Most of these are usually just harebrained schemes that no other investor wanted to touch anyway. Sure, there’s a hidden gem every now and then, but the safest play is to just put your money in a bank.

Other Useful Resources for Lottery Winners

Want to know what others think you should do if you win the lottery? Check out insights from experts and regular people through the following links:

Reddit – What to do if you win the lottery?

There are numerous Reddit threads discussing this particular topic. Follow the links provided if you’d like to see what the community suggests, or to share your own thoughts. These are some of the more popular threads still active.

The main takeaways from the discussions above are unsurprising. To summarize:

  • Lottery winners should do their best to protect their privacy.
  • Most people envision that winning the lottery will enable them to live out their lives in comfort while simultaneously generating passive income. A common idea is to invest in real estate and earn through rental money.

What to Do When You Win the Lottery Book

Also, there are books you can purchase to guide you through life after winning the lottery. Click on any title below to purchase a copy for yourself:

Final Thoughts

While the life of a millionaire is fraught with challenges, hiring the right people enables you to enjoy your winnings well into the future. Of course, that’s if you do your part! Lawyers and financial advisers can only do so much, so if you don’t want to end up broke, be smart and stick to the game plan!

A step-by-step guide on what to do if you win the lottery. Plus, what not to do and avoid losing it all! ]]>