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Sather Financial Group

120 E Constitution St
Victoria, TX 77901

(361) 570-1800



 

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Winning The Powerball

Congratulations. You overcame the 292 million-to-one odds and picked the numbers for the first-ever billion dollar lotto. Before you jump for joy, scream from the mountain tops and announce your good fortune on every form of social media….don’t.

Reality needs to set in before you do anything.

First, don’t tell anyone unless you want a bulls-eye on your forehead. The more you run your mouth about your riches, the bigger the target you become. Once you let the genie out of the bottle you will never get it back. Silence is golden!

If something needs to be said, let your attorney do the talking.

Make a copy of the ticket and put the original in a safe deposit box. No matter the document, you want to store valuable originals in a manner that will be protected from fire, flood or theft.

Get cash up front. Although you will only get about half the money, you will get it today versus payments over 20-plus years. In this case, your investment hurdle rate is only about 3% per year to make it worthwhile. Additionally, income tax rates could increase in the future. Lastly, there are lotto winners in Illinois who are suing the state to collect their winnings.

Cash up front puts you in control.

Sit down with your attorney, financial planner and tax person. Have them, and their staff, all sign confidentiality agreements.

Recognize you will turn over at least 44% of your newfound wealth to the IRS before you make any decisions.

Work with your professional team to complete proper estate, gift and trust planning. If you die tomorrow without some serious estate planning, the government will claim 40% of your assets above $5.45 million.

Get a P.O. Box and an unlisted phone. You are about to find out how much you under-appreciated privacy and anonymity.

Request the local appraisal district remove the listing for your home from their online records. This will slow down many nosy individuals from finding you.

Leave town for a while…like a year. Seriously. If you pull a funny money windfall, and it becomes public knowledge, you are going to want some time to relax and think in peace and quiet.

You will have every long-lost friend and distant relative beat your door down wanting you to fund their latest harebrained scheme, restaurant or bar. This is true, even though they have no experience running an endeavor of this nature and no self-respecting bank would ever lend them money.

Despite the best intentions, some will get through to you. Tell them you have assembled a professional board of directors to evaluate all loan or investment requests. Anyone wanting money must submit a legitimate business plan for consideration. Tell them to mail it to your P.O. Box. This will reduce 95% of those looking for a freebie.

You will be hit up for every charity and hard luck case known to mankind. I have to admit that if I hit it big, I would have a very hard time saying no, especially when I know there are many people with genuine intentions and needs. To assist in filtering through the con-artists, require them to submit a one page proposal on why they deserve the money and what they plan to do with it. Our firm has worked with a few lottery winners in the past. Amazingly, this one requirement will thin the requests by more than 50%. Most people just want a handout—but they aren’t willing to do any work for it. 

Put your assets into protective entities like limited liability companies not associated with your name. Have the mail go to your attorney. Although you legally own the assets in question, you want that to be your private business and no one else’s.

Work with your professional team to set a budget. Many lotto winners have ultimately gone broke after hitting it big despite sufficient funds to last several lifetimes.

Although I’d love you to win the lotto, the odds are obviously against it and I’m not holding my breath. However silly the above discussion may seem, the concepts apply equally to people with a hot IPO, a huge Eagle-Ford well, a large inheritance, lawsuit award or big business transaction.

Regardless of which of these you are dealing with, a little bit of planning can allow you to keep your sanity, your privacy and better manage your life.

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.