Share and Follow
Powerball tickets await players at Cumberland Farms convenience store (Photo by William Thomas … [+]
Getty Images
Big congratulations, you’ve just won the Lotto! Especially today in California where a winning Powerball ticket was bought at Joe’s Service Center in Altadena. But even before you start planning what you’ll do with your windfall, you need to take some important steps. You don’t want to blow this rare opportunity!
First steps: Sign your ticket! You don’t want anyone else to claim your prize if your ticket gets lost or stolen but that’s exactly what could happen if you haven’t signed your ticket. Also take photos of the front and back of the ticket and put it in a safe place until you can redeem it. BE SURE to check how much time you have to claim your Powerball Prize. If the date isn’t listed on the ticket, contact your local lottery and ask. You want time to make some decisions.
Global communication network concept. Social media. Worldwide business.
getty
Make a plan to protect your privacy: Wait to tell people besides your closest family members. If your state allows you the option of keeping your identity private, be sure to do so. In some states, you must reveal your name, place of residence, and photo when you win a Powerball jackpot — and the lottery commission must relay that information to any third party who requests it. California requires the lottery to publicize the winner’s full name and the name and location of the business that sold the winning ticket. Some other states allow you to keep your winnings private. Some states allow you to claim your prize under a trust or LLC, which can shield your true name. Others allow you to use just your first initial and your last name.
Make it harder to reach you if you can’t claim anonymously: To stave off the swarm of solicitations that are likely to follow a disclosed lottery winner, change your telephone number and give the new one only to people you trust. Set up a P.O. box or virtual mailing address to protect your home address from unwanted solicitations. Delete your social media accounts or start new, anonymous ones and follow only your closest real-life friends.
Read Related Also: More Mixed Signals On The Housing Economy
Keep calm and start planning: Don’t get overwhelmed and work out a step-by-step plan before cashing in your ticket and making decisions about your winnings. Have your team and plan before you cash in your ticket. Assemble a team to advise you, including a CPA or other tax advisor, a financial advisor and an estate attorney to update your estate plan.
Some things you need to know and do: With a Powerball jackpot you need to decide whether to receive a lump-sum or annuity payout. Lottery winnings are taxed for the year in which they are collected, which allows winners to choose annuities to spread out the tax bill over several years. (Your financial and tax advisors can help you decide.)
Other considerations: Pay off all your debt. Don’t quit your job until you receive your first winnings check and talk to your financial advisor about income and retirement planning. Make a wish list, based on conversations with your family members, then your financial advisor, to see what is feasible.
If you want to share the wealth: Spreading your windfall around through gifts to family members/accomplish goals, friends or charity is commendable, but should be done with an eye on tax considerations. You may want to take advantage of the annual gift exclusion– this year, it’s $16,000 if you are single or $32,000 if married. You can give more in subsequent years, all without incurring taxes for you or the recipients of your generosity. If you find yourself overwhelmed with donation requests from many worthy causes, a donor-advised fund will allow you to contribute and invest assets and then grant them to charities at a future date. You may want to discuss these options with your financial advisor as well.
Don’t abandon good financial practices: Set up an emergency fund, add to retirement and college funds, diversify investments for income, liquidity and insurance. Spread your investments around so that your exposure to any one asset is limited. This will help you reduce volatility in your portfolio over time.Consider tax-free fixed-income investments that can help your money grow and provide you and your household consistent income.
