The Mega Millions lottery was up to $630 million after no winner matched all 6 numbers Tuesday.
“I’ve represented in lawsuits 6 lottery ‘losers’ who lost their winnings to various investment scams and whoever wins tomorrow’s drawing will immediately be deluged with offers from financial planners, scammers, friends and family to invest,” Attorney Andrew Stoltman said.
The curse of the lottery losers is very real. Unfortunately, these instant millionaires often lack experience with managing money and basic investing skills, making them perfect targets for scammers.
Here are the steps a winner SHOULD follow immediately after hitting it big:
- Buy A Safe and Keep the Ticket Safe: The winner is not a true legal winner until the ticket is presented to lottery officials. If the ticket is lost or destroyed, the winner is, as a matter of law, out of luck;
- Don’t Share The News Outside Of Immediate Family: The worst initial decision a lottery winner can make is sharing the news with other people outside of immediate family. “Friends” and others seeking to help will come out of the woodwork;
- Don’t Take The Lump Sum: Over 90 percent of winners take the immediate lump sum. But it is best not to take it, at least at first. Spreading the payments out lets the winner over time learn investment lessons and apply those lessons. To make a mistake with the first year’s winnings is not catastrophic if the winner is going to receive another 25 years’ worth of payments;
- Immediately Assemble A Team of Financial Professionals Including a CPA, Lawyer and Financial Advisor Recommended by Another Professional: Few lottery winners have the infrastructure in place to manage a lottery windfall. An experienced team must be put together, and fast. Each team must have at a minimum an attorney, CPA and a financial professional;
- Learn the Basics: Despite having a financial team, the winner must gain some core financial knowledge quickly. With this knowledge it becomes easier to weed out “professionals” or others that might want to scam you;
- Keep the Money Safe Until A Full Plan Is In Place: As Warren Buffet says, “Rule number 1 is don’t lose any money.” Because the sum is too large for it to be covered by FDIC insurance, the winnings should be deposited in a brokerage account of a major broker-dealer like Merrill Lynch or Goldman Sachs and it should be initially invested in short term U.S. Treasuries until more concrete investing decisions can be made;
- No Major Decisions For Six Months: It’s tempting for a lottery winner to quit his or her job or immediately splurge on a mansion or other large purchase. Don’t. The worst decisions made by lottery winners are usually the first few decisions;
- Trust Nobody: The winner is likely the biggest target of banks, brokerage firms and scammers worldwide. Ultimately, nobody should be trusted. Multiple sets of eyes should be watching everyone who has any access to the funds;
- Get Off Of Social Media: The winner should get off of Facebook, Twitter and Snapchat for a very long time;
- If you are doing an office pool: basic steps should be taken for everyone’s protection. Draft up a BASIC agreement as to who is in the pool and how much is invested. Have ONE person collect the money and buy the tickets. Communicate via email so there is a written record of what was discussed. Some of the nastiest legal lottery fights involve office pool winners and who was, or was not, involved in the pool; and
- Winners Should Be Allowed To Be Anonymous: Unfortunately, in most states lottery winners are required to have their names disclosed publicly. This is a massive problem, and the laws should be changed to allow anonymous winners. By forcing winners to have their names released, this puts a massive target on the winners and allows the lottery to use the winners as defacto salespeople. It exploits the winners simply to sell more tickets.