Investing

Powerball Lottery Hits $184 Million -- 12 Things Not to Do If You Win!

Jon C. Ogg

Published: April 12, 2016 2:35 pm

Last Updated: January 13, 2020 10:51 am

History may have been made with a record lottery of well over $1 billion in recent months. That might not make a $184 million lottery sound like all that much, but the reality is that very few lotteries end up having a face value of $100 million. So this week’s $184 million Powerball lottery drawing for April 13, 2016, is certain to create multi-generational wealth above and beyond what most of the smartest entrepreneurs accomplish in their lifetimes. This is kingmaker money!

24/7 Wall St. has tracked many lotteries over the years. Unfortunately, many lottery winners end up broke, some of them in just a few years. That is why we have created a how-to guide for winners with 12 Things Not to Do If You Win the Lottery!

The Powerball jackpot starts at $40 million and then grows at each drawing until someone matches the winning Powerball numbers. The current estimated annuity value of $184 million comes with a lump sum estimated cash value of $122.4 million.

If the odds hold up, then they would be 90% or so that at least one person in America will win. The official Jackpot odds are 1 in 292,201,338 for the larger sum. For the $1 million lottery, without the extra ball, those five numbers for the $1 million prize come with odds of 1 in 11,688,054.

So what happens if you win the lottery? Yes, you are suddenly rich. But with that newly found wealth comes the need for extreme responsibility. Many reports have been made on what lottery winners should do. Very few reports actually focus on what lucky lottery winners should NOT be doing. Hence, our 12 Things Not to Do If You Win the Lottery!

Imagine getting north of $100 million and ending up broke in a few years, or even in a decade. Those fortunate winners who become losers will be the brunt of jokes at every gathering with friends and family. Really.

Becoming big spenders by buying lots of houses and cars is putting their futures at risk. Not thinking about tax ramifications. Thinking you don’t need a financial advisor. Blabbing to everyone that you won. These are all recipes for disaster.

Before you think blowing over $100 million isn’t easy, guess again. You can blow tens of millions of dollars in days or weeks if you want. Private jets, mega-yachts, entourages, private islands, mega-mansions, luxury cars, private concerts, luxury jewelry, fine art and other collectibles — they can add up to over $100 million (or even over $1 billion) faster than you might think.

24/7 Wall St. would not want to see any lottery winner go broke. More importantly, some lottery winners never even know they won. At least two lottery winners have been murder victims.

The following are 12 things not to do if you are ever lucky enough to win the lottery.
Don’t forget to sign the ticket or report to the state.

It is sad, but not signing a ticket or failing to report to the state appear to be the simplest and most common errors to make. Can you imagine losing a lottery ticket with the winning numbers? Then imagine what can happen if someone else takes your winning lottery ticket and shows up to collect the prize. Fighting over true ownership of a lottery ticket is not a simple task, and many disputes have arisen over who owns what ticket.

In a way, lottery tickets are almost like the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds in hand. Lottery tickets expire at different times from state to state, but they generally expire in 90 days to one year. And many winners never show up.

Don’t run out and tell everyone you know.

If you suddenly win millions of dollars, chances would have to be pretty high that you will to want to brag about it. How could you not? The problem is that announcing to the public that you won before you collect your winnings can put you in grave danger. Literally, this can be perilous. Everyone who has ever done anything for you now may come with their hands out asking for something, or worse.

You probably have heard of kidnap and ransom insurance before. One lottery winner was even murdered and another lottery winner was suspected of being murdered over a recent influx of cash. If you can manage it, and if your state allows it, try to remain anonymous as long as humanly possible. How you became vastly wealthy will be found out in time anyway. There is just no need to alert everyone you know immediately.

Some lottery winners want all the cash up front, and they take a discounted amount in order to do so. Other lottery winners choose to receive the annual annuity payments. Getting tens of millions of dollars at once probably sounds better than getting a paycheck for the next 30 years or so. Now consider that close to 70% of lottery winners end up broke, many within a couple or few years. Let’s say that you can choose to get over $100 million up front, or you can choose to receive a payout slowly over the course of a lifetime.

Most people choose the lump sum rather than the annuity payment, as it is instant empire-making money. Go see a reputable and visible tax professional and a reputable investment advisor at a top money management firm with a widely recognized company name and a long corporate history. This theme of “reputable and visible” will echo throughout. Do this before you make the decision about a lump-sum or annuity option.

Don’t think that you are now a master of money and finance.

Just because you became vastly rich overnight, chances are high that you will not be the best person to manage your money and financial interests. If you go from living paycheck to paycheck today, does it sound right that you will know the best things to invest in and the best tax and asset protection strategies?

There are many ways to invest and protect that fortune, and that might not include just buying some stocks and bonds and letting it ride. Your drinking buddy might also not be the best choice as an advisor and expert. Having a solid and respectable team of advisors and managers in place will act as your buffer that protects your assets now and in the future. Also, don’t think that this money is a tax-free payment, as you probably will have to pay the top tax bracket to the IRS and the highest state and local income taxes.

Ask yourself (and be honest here) if you know how to protect your assets against all financial threats and most risks and know exactly how to protect your estate in case you die or become incapacitated? Here’s a hint for the answer: If you answered yes, you probably did not bother playing the lottery.
Don’t forget about the debt and obligations you have.

Many people think that being rich means you don’t have to be fiscally responsible. If you get the “I’m rich and don’t have to pay anymore” bug, chances are pretty good that you are dooming yourself. One lottery winner in California was strapped with debt from property purchases and also was strapped with what seemed to be excessive insurance policies.

Whether you take the lump sum or the annuity option, if you have a single penny of debt in the immediate future and distant future, then something is seriously wrong. For that matter, you should not have a single debt ever again. If you manage to go broke down the road and still have a mortgage, car payments, student loans, credit card debt and personal bills, you will have lost the right to be mad when all of your friends and family members ridicule you every day for the rest of your life.

Don’t become a high-roller or live too large.

If you go from living a simple life to instantly being able to spend hundreds of thousands of dollars (or more) per week, what do you think happens to your expectations in life ahead? Chances are high that you will want more of the same. If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars (or more) per play, you are dooming yourself. Wait until the real con men find you.

Taking you and your favorite 50 people on a luxury cruise around the world can become very expensive, very fast. Having an entourage generally only works for people who keep making more money, and entourages have bankrupted many musicians and athletes.

There has to be a huge temptation for lottery winners to go out and buy all the millionaire toys they can think of. The answer here is simple to say and hard to follow, but you likely will regret the decision if you go out and buy dozens of cars, houses and whatever else you can think of for you and your friends and family members. This will start you on a bad path, and you could easily become the next friends and family personal welfare department.

If you start buying everything for everyone, chances are high that they might expect that to last forever. The other end of the story is that you do not have to be a cheapskate either. Now consider a personal lottery story that was told in which a lucky winner bought more than 30 cars and multiple houses in three months for himself and friends and family.

Don’t think you don’t need a budget!

Do millionaires have budgets? The smart ones do. Maybe it sounds crazy that you have to live within means when you get instant empire-making money. After all, most lottery winners instantly become wealthier than everyone they know combined. This also goes back to having advisors and being prudent, but at the end of the day you do still have a finite sum of money. Chances are very high that you will make some serious purchases and your lifestyle will be changed forever.

Without setting limits for yourself and for what you do with others is a recipe for disaster. Again, many lottery winners go broke. If they went broke in a very short period, what do you think the reflection about wishing for a proper budget would be?
Don’t become a banker and business backer to everyone!

Leave being a venture capitalist up to the venture capitalists. One common theme that has come up with lottery winners with instant vast sums of cash is that friends and family start pitching them on endless business ideas. Sure, some will sound great and some will sound crazy.

If someone has no knowledge of a particular business and does not know what it takes to actually run a business, will that person do better because a lottery winner who lucked into vast wealth provided money to start it? If your answer is yes, you seriously need to protect yourself (from yourself). Now think about whether most lottery winners had the understanding of how to run a business the day before they won the lottery.

Don’t just give it all away!

Some lottery winners might feel so lucky that they want to give away just about all their money to a charity or to a religious institution. This sounds great, but even the truly wealthy who earn their money the hard way do not do this. You can be more than generous without doing the unthinkable. Imagine what you will feel like down the road if or when a serious crisis arises in your life or your family’s lives and you no longer have the finances to help.

Should you be charitable? Absolutely! Should you give it all away just because a church or a charitable group does good things? Absolutely not. If you insist on giving away your new-found fortune, do it the way the wealthy do it — structure your will and estate to give away your fortune upon your death.

24/7 Wall St.
States With the Highest (and Lowest) Sales Taxes

Being a high-roller is one thing, but you can go incredibly broke trying to keep up with celebrities. Keeping up with the Jonses is bad enough, but do not try to keep up with the Kardashians or other celebrities. It may seem cool to own a 200-foot yacht or private jet or to have your own entourage. It may also seem cool to own castles in Europe or Picasso paintings. These can easily drain your financial statement to zero. Trying to dodge taxes might even sound appealing to misguided people. Now go add up the price tags of these things, plus the cool cars and houses and the rest of it.

It is easy to go broke, even for stars and athletes. Just ask people like Nicolas Cage, Wesley Snipes, M.C. Hammer, Evander Holyfield and many other famous people who had it all and ended up broke or close to it how they feel about things. And dodging your taxes may come with a greater price than just mere penalties.

Don’t think that laws and decency no longer apply.

It is true that the wealthier you get, the better attorneys and legal defense you can afford. Still, you will have to live under the “good citizen” laws, and you still likely will have to pay taxes just like Warren Buffett’s secretary. Living a reckless life without concerns about the laws of the land will not keep you from going to prison (or worse). Most good sports coaches will tell their star athletes up-front that chances are high they will have to be human for far longer than they are going to stars.

Movies can glamorize scoundrels, but what good does it do you if you are incredibly wealthy and such a pariah that no one will associate with you? Remember, you don’t get to take any of your wealth with you when you die. And how fun will it be to be paying out all of your winnings to attorneys fighting to keep you out of jail or fighting civil suits looking to take your new wealth away?

***************

Again, 24/7 Wall St. would not want anyone who wins the lottery to end up without a penny to their name (or worse). Following a list of things to do or not do sounds easy enough. Unfortunately, life’s temptations can get in the way of logic.