As the Powerball jackpot reaches an estimated $1.3 billion, many have started making plans for what they would do with the money if they were to win: buy an island, pay off debt, buy luxury cars. While it might seem tempting to quit your job upon drawing the winning ticket, let's look into what a potential lottery winner should consider doing with their winnings:
Go anonymous. And stay low.
It wouldn't be a good idea to broadcast the winning lottery ticket on social media networks. A much better idea is to check state rules to see whether lottery winners can retain their anonymity. According to Forbes, states have differing rules on how the lottery winner is publicized.
If the lottery winner lives in a state that makes the identity of the winner public, like New York, there are other ways to maintain anonymity. According to NBC News, some states allow lottery winners to establish limited liability companies, or LLCs, so that companies are identified, and not individual names.
Learn from the past mistakes of others.
Some lottery winners received their lottery winnings and met disastrous ends. Learning from the past mistakes of other lottery winners, who fell to overspending, gambling or drugs, will lessen the chances that a future lottery winner will make the same mistakes.
Hire lawyers and financial planners.
One of the first tasks any lottery winner should put on their list is to form a superstar team of lawyers, financial advisers and public accountants to help navigate through the new wealth. According to Andrew Stoltmann, a Chicago-based securities attorney who has experience representing multiple lottery winners in court, it is important to "head to the office of an established and reputable investment firm and ask to talk with someone."
Once someone has won the lottery, that person can "become one of most heavily targeted marks in the entire world," Stoltmann told USA Today.
Be responsible and pay off your debts.
Don't try and buy everything in the world at once. According to Forbes, "there is no better investment than paying off debts." A lottery winner has the option between taking all of the prize money in a lump sum, or being paid in 30 installments over 29 years. Jim Dew, president and CEO of Scottsdale's Dew Wealth Management told KPNX in Phoenix, that taking the former may be a better decision.
"If you're going to invest the money and you have a good team and you know what you're doing, you can do much better over 29 years than taking the annuity payment," Dew said. "But why would you take the annuity payment? If you're bad with money, you don't have a good team. That way you can blow it for the first several years and you still have a lot coming down the road."
Keep family and friends at arm's length.
Last but not least, lottery winners can expect to be slammed with requests for financial aid from family, friends and people who claim to be one or the other. This is a quick way to run out of money — giving it away to everyone who asks. A smarter route may be to set up a trust fund.
The next Powerball drawing will be held at 11 p.m. Wednesday. Ticket sales will cut off approximately one hour prior to the drawing.