What to do if you win the lottery in texas
Congratulations to the largest jackpot winner in history, $2.04 billion, and beating the odds of 1 in 292.2 million! It is truly astonishing. Sudden large windfalls can also come from an inheritance, settlement, sale of a business, or lawsuit proceeds. The steps one should take once the initial shock has worn off will be the same. Here are our recommendations on how you should proceed in making crucial early decisions to protect yourself and your family.
Once people find out you have a sudden windfall you may be overwhelmed by everyone wanting a piece of the pie. Debt collectors, long-lost relatives, and even strangers will be asking or suing you for money. Additionally, there have been instances over the years where winners have been robbed and even murdered in their homes from theft gone wrong. Don’t gamble with your well-being, keep your winnings private. Currently, seven states (including Texas) allow you to claim your prize anonymously. For the rest of the states, check to see if you can claim under a trust or LLC to hide your identity. If you find yourself in a state that requires disclosure, take the necessary steps to get a new phone number, and email address and even change your address if you can. Keep in mind that there is a time limit to claim your prize, so after a bit of celebrating, it will be time to get to work.
Should you take the Lump Sum or Annuity?
Before you claim your prize, you will need to make a decision on whether to take a lump sum or the annuity payment, which is paid out in 30 installments over 29 years. According to the National Endowment of Financial Education, 70% of lottery winners end up bankrupt within 5 years or less so it’s important to choose the payout method that is best suited for your situation. Ask yourself if you are disciplined enough to manage the entire lump sum at once or if should you mitigate impulsive spending temptations by selecting the annuity. Once you make a choice, you cannot switch it later on. There are multiple things to consider with each option. If you opt for the lump sum, you must pay the taxes on the entire winnings in the year you receive them. This would likely push you into the highest tax bracket. Whereas with the annuity you would be taxed as you receive your annual payment which could provide some tax benefits or possibly be at a reduced tax rate. We can’t see into the future of our government’s tax legislation so you would be hedging your bet as to where tax rates may be in the future. A financial advisor could run simulations to help you decide which route is best for you. In addition, if you were to pass away during the annuity period of 29 years, your estate would still be responsible for the taxes so you would need to have enough saved, a life insurance policy, or make sure the rules of your winning game allow for accelerated payments in the event of death.
Draft your Fantasy Team
The quarterback for all your financial decisions related to your winnings will be your Financial Advisor. Working with our team means you are working with a wealth management firm with a deep bench of women financial advisors that are acutely aware and familiar with financial planning for women. We help women build and maintain a financial plan along with helping women avoid common financial planning mistakes so that they can maximize their potential for success.” It is critical that you find a Registered Investment Advisor (RIA) (preferably a CFP, Certified Financial Planner, or CFA, Certified Financial Analyst). RIAs are registered with the SEC and serve as fiduciaries to act independently on your behalf. Your trusted advisor will work with you to outline goals for your changing lifestyle. They will be refining cash flow models, constructing investment portfolios, ensuring proper asset protection, and developing complex estate planning strategies to build and retain your newly acquired generational wealth. There are strategies your Advisor might suggest to help mitigate the tax impact. If you are charitably inclined, they may suggest utilizing a Donor Advised Fund or setting up a private foundation. Advisors will make recommendations for money given directly to family or friends so that it is kept under annual gift tax exclusion limits and provide tax-efficient ways to pay for education or medical expenses.
Once you’ve found a trusted Advisor, the next player on your team should be an attorney. Your advisor can recommend an Estate Planning Attorney that can draft the appropriate documents if you decide to set up trusts or want to make special gifts. They can also help with identity protection and, setting up different entities like a blind trust or LLC. You should also discuss the impact of claiming the winnings individually or jointly with your spouse before claiming. Marital claims to the winnings should be discussed with your attorney before claiming. You may also want to consult with a business or real estate attorney based on your situation.
An equally important teammate will be your Accountant. With additional wealth, comes additional complexities as it relates to your tax situation. Having a CPA work alongside your Advisor will allow you to strategize and prepare for the tax impact the winning will have on tax liability going forward.
You’re probably familiar with the saying “Money doesn’t buy you happiness”. But it does give you the financial freedom to do the things you enjoy the most. Explore your passions to find where you can have meaning in your life. That may be through your job or volunteering or hobbies or even through charitable giving. We would encourage you to use this money as a means to seek out ways of self-fulfillment so you can enjoy your new life, living the dream of happily ever after. Involving a team of experts to guide you will not only alleviate some of the stress but will also set you up for success so you can enjoy your winnings!