
You just discovered you won the lottery. Congratulations! Even better, you’ve done the smart thing and googled for what to do if you win the lottery, hopefully before doing anything rash.
Now is the time to be very careful — the number of stupid things you can do greatly outnumbers the smart things. For example, did you know that you can accidentally lose all of the winnings depending on how you try to claim them? Luckily, this is the resource you need to follow to keep those lottery winnings.
Keep it Secret, Keep it Safe
You can tell people that you’ve won, but only do it after you’ve set yourself up legally to protect yourself and your winnings
If you don’t protect yourself first, you may be surprised to find people filing frivolous lawsuits against you. People might intentionally trip on your property just to sue you.
I know it’s hard, but you need to be silent. Listen to wise Ben Franklin: Three can keep a secret, if two are dead
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Scan, Photocopy, Backup
Keep the original ticket in a double layer of ziplock bags in an opaque envelope. No need for prying eyes to see what you have, or for a spilled coffee to destroy your fortune.
Before you do anything you need to make copies of that ticket. If you have a scanner at home, scan the ticket and keep it in a encrypted folder on your computer or on a remote backup site.
After you’ve done this, go to your local photocopy place, (assuming you don’t have a copier at home) and make several duplicates.
For the love of God, double check the photocopier before you leave. You don’t want to have discarded copies in the waste basket or the original ticket in the photocopier.
Don’t Do Anything Stupid
Now comes the hard part: don’t do anything stupid. Take this to mean don’t do anything you wouldn’t have done before winning.
Don’t quit your job before you get the money. Don’t buy a flashy car or take a trip to Las Vegas. People will ask questions. People asking questions is not what you want.
Remember: your anonymity is your greatest asset. Guard it.
Get a Safe-Deposit Box
Even with copies of the ticket in hand and an encrypted copy on the net, you will find that you are suddenly paranoid. Keeping the ticket on your physical person or in your house is not only a bad idea, but it will make you become obsessive-compulsive about checking and re-checking the ticket.
What you need is a safe deposit box. There are about two million burglaries each year in the United States each year but only 25 thefts from safe-deposit boxes each year. If you think your winning lottery ticket is safer in your house, you are potentially making a million-dollar mistake.
Gather several papers to act as decoys and bring them, with the ticket to your bank to open a safe deposit box. If the bank teller ask what you want the box for, don’t say “For my lottery ticket”. Say your want to storing important, original documents.
Check That Deadline
Most lotteries in the United States have a deadline of 180 days — but some are sooner. Find out what the deadline is and put a big, red circle on your calendar.
You might think it unlikely that someone would take too long to turn in their ticket, but it happens regularly. In November, someone in Texas failed to claim their ticket for seven million dollars.
Don’t be the guy who shows up one day too late for his millions.
Open a Blind Trust
What you need to protect your anonymity is a blind trust. Hire a tax attorney to set one up for you. Once you’ve paid the attorney, he is legally bound to maintain your anonymity. It is through the attorney, and the blind trust that he sets up, that you will contact the lottery board in your state and collect the money.
By collecting the winnings through a blind trust, the lottery board will never know who you are and thus can’t splash your name on the news. The lottery commission wants to put you on the news because it sells them more tickets, not because it does you any good.
Opening a blind trust is vital if you are a minor who won the lottery. In some states, if a minor is given a winning ticket as a gift, and they walk into the state lottery office to collect the money, the ticket is instantly invalidated.
Take The Lump-Sum Payment
There is a lot of argument on the Internet about whether to take the lump-sum payment or the annual payments. Don’t listen to any of it: just take the lump-sum payment. You’ll be better of financially and psychologically.
If you don’t believe this is the better option, take a listen to this This American Life story on lottery winners.
Ask Yourself: Is it Really Enough to Quit Your Job
It may sound ridiculous, but a million dollars isn’t a lot if you’re thinking about not working for the rest of your life.
Income tax will take away 30% to 50% of your earnings depending on the jurisdiction. If you just won a million dollars, you’re not a millionaire. You’re a hundred thousandaire.
So, do you have enough money to quit your job? The answer is ‘yes’ if you can live on 4% or less of the post-tax money annually.
If you won $600,000 in the lottery after taxes, you’re looking at an annual, pre-tax income of $24,000. If you won a million dollars you’re annual income will be $40,000.
Hire a Financial Planner
Don’t hire someone who will ‘manage your money for you’. Your winnings, and maintaining them, are now the biggest responsibility of your life. If you don’t directly manage your money, don’t be surprised when your financial planner makes off with most of it.
A good place to start looking for someone to trust is Dave Ramesy’s recommended financial planners.
Once you’ve collected the money, pay off all your debts, any tickets or legal problems you may have. Set aside a year or two’s worth of expenses in a safe bank account to act as emergency fund.
Get Your Story Straight
Once you’ve collected the lottery winnings, people are going to wonder why you’ve quit your job. Have a simple story that doesn’t relate suddenly getting a windfall of cash. Tell people that you work ‘in computers on the Internet’ or ‘as a corporate consultant’ and leave it at that. If your story is boring enough most people won’t ask followup questions.
Have Fun
Now go out and enjoy the good life, you lucky bastard.
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Header photograph by Robert S. Donovan
Tags: lottery