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When You Win the Lottery
3 tips for turning sudden wealth into a lasting legacy
“I
’d buy a hunting preserve.” “I would write children’s books.” “I’d
hire a personal chef!” “I’d travel to every country I’ve ever wanted
to see…and maybe buy a second home in the place I like the
best.” A quick survey around the office yielded those responses to the
question “What would you do if you won the lottery?”
After the frenzy surrounding the $1.5 billion Powerball jackpot
earlier this year, you likely already know that your odds of winning
the lottery are slim – about 1 in 292 million. Still, the price of a ticket
buys you a moment to dream, and to consider what you would do if
you suddenly became a mega-millionaire – or billionaire. Coming into
sudden wealth can be both thrilling and overwhelming, and we’ve
all heard stories of winners who ended up broke just a few years after
hitting it big. Here are our top three tips for turning sudden wealth
into a lasting legacy.
1. Assemble a team of professionals. You’ll need a financial advisor
to help you decide how to invest, an accountant to help determine
the tax ramifications, and an attorney to handle your newly acquired
estate planning concerns. We recommend hiring each professional
independently, rather than accepting your financial advisor’s
recommendation for an attorney, or your attorney’s recommendation
for an accountant. Why? So that your team can act as checks and
balances for each other – you can request your accountant’s opinion
of the plan your financial advisor has put together, and get your
attorney’s take on your accountant’s advice. Carefully evaluate each
professional’s experience, record of complaints from past clients and
whether the advice being offered makes sense to you.
2. Determine how much you can really afford to spend. Did you
hear about the guy who won $4 million and proceeded to pay off
his mother’s house after buying homes and cars for himself and for
each of his two children? The lottery made him wealthy, but he did
not remain wealthy. If you wish to remain wealthy over the long term,
and leave a legacy for your heirs, then before making major buying
decisions, determine how much you can spend without squandering
your principal. Depending on your age, that’s likely going to be 3-5%
per year of your total after-tax winnings. So if you net $50 million, you
may be able to comfortably spend around $2 million each year while
potentially preserving your principal over time.
3. Protect yourself. The wealthier you are, the greater your risk
of falling victim to various schemes, scams and lawsuits. You’re
also much more likely to be approached for help from friends and
family members as well as for donations to charities. Work with your
attorney and insurance professional to create liability protection
against lawsuits, and have one member of your team serve as your
spokesperson for all financial requests. It isn’t always easy to say “no,”
but it’s not too difficult to
tell those seeking a piece of
your wealth that all requests
must go through your
financial representatives.
This Industry Insight was written by Sara Botkin.
Sara Botkin is President of Botkin Family
Wealth Management in Peters Township. Visit
www.botkinfamilywealth.com or call 724.941.1737 for more
information.
Securities offered through LPL Financial, member FINRA/SIPC. Investment
advice offered through Private Advisor Group. Botkin Family Wealth
Management and Private Advisor Group are separate entities from LPL
Financial.
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