Schedule a Consultation Today  |  624 North Front Street, Wormleysburg, PA 17043

Law Blog

What To Do If You Win The Lottery

At the time this article is being written the “Powerball” jackpot has reached an all time high of $1.9 billion dollars.  When the lottery winnings reach these levels even some of the greatest skeptics can be caught purchasing a ticket or two.  For many of us just the few minutes thinking of what life would […]

At the time this article is being written the “Powerball” jackpot has reached an all time high of $1.9 billion dollars.  When the lottery winnings reach these levels even some of the greatest skeptics can be caught purchasing a ticket or two.  For many of us just the few minutes thinking of what life would be like with such winnings is worth the few dollars spent. 

Even though you are more likely to be killed by a meteor than to win the lottery, if you do happen to be the lucky one, there are a few things that you should keep in mind before rushing to claim your winnings.

7 Things on What To Do If You Win The Lottery

Assemble Your Team

There is a reason the wealthiest people in this country hire professional wealth managers, CPAs, and attorneys. A skilled financial advisor will help you create a wealth management strategy, helping you to grow your winnings.  As your winnings grow, you will need a CPA will to devise strategies to minimize your annual taxes.  You will most likely be in the highest brackets for the rest of your life.   

While we freely admit our bias, the most important member of your new “dream team” will be a skilled and knowledgeable attorney.  An experienced attorney can help you navigate the legal intricacies of claiming your winnings and setting up your estate to provide for you and your family’s needs. 

Your attorney will be required to keep all of your affairs confidential, but it will be important to ensure the rest of your team has signed confidentiality agreements in order to protect your anonymity. 

Protect Your Ticket 

Assembling your team of professionals and making all the necessary decisions before claiming your prize can take some time.  You will need protect your ticket until you claim your prize.  Make sure you place the ticket in a fireproof safe or safety deposit box that ONLY YOU have access to.  Do not sign the ticket until after you decide how the prize money will be claimed, once the ticket is signed, the individual whose name is on the ticket must be the one to claim the prize.   

Confirm the Deadline for Claiming Your Winnings 

Each state has different rules for how long a winner has to actually claim their prize.  Pennsylvania allows for a winner to wait up to one year from the drawing date to claim their winnings.  The team of experts you’ve assembled and the planning for such a windfall will take some time and resisting the temptation to go claim the prize right away will avoid unintended consequences. 

Claim your Winnings Anonymously 

Winning such a large amount of money will make you a target for everything from frivolous lawsuits to constant charitable solicitations and of course all those old friends and distant relatives will pop out of the woodwork and want to reconnect.  There is a long history of lottery winners losing millions to lawsuits and squandering hundreds of thousands in legal fees to defend against such suits, as well as the added family drama when relatives feel they are not being given the amount they “deserve.” 

The only way to ensure your continued happiness and a relatively “normal” life is to protect your anonymity so only the inner most circle of relatives know your true fortune.   

Pennsylvania, like most states, requires that a lottery winner disclose their first and last name, date of birth, social security, and residence.  They are required to (and do) report to the public your first name and last initial as well as the county of the winnings.  For many people this may be enough information to expose them to at least speculation.  There are a few loopholes in the law which allow a winner to stay anonymous.  For example, in Pennsylvania, winners do not need to be a “natural person” meaning that a trust or partnership can claim winnings.  By setting up a legal entity such as a limited partnership or LLC, or a trust.  The winnings can be claimed by that entity leaving your personal information completely out of public view.  The formation and structuring of this entity is one of the most important aspects in claiming and protecting your winnings and this is where a good and experienced attorney becomes paramount. 

Decide Whether to Take the Lump Sum or Annuity. 

When you claim your winnings, you have the choice between taking a lump sum all at once, or receiving a series of payments over time as a structured annuity.  If you chose the lump sum option, the payout is not 100% of the prize amount.  It is about 70% of the total prize value, and that is before taxes.  There are some advantages to this option that you should consider.  Investing all of those funds in the market will most likely beat the income earned in the annuity option (annuity gives a 4% return whereas the market on average has had a 7.58% return over the last 50 years).  While your taxes every year are going to be in the highest bracket no matter what option you chose, taking the lump sum would avoid any increases in taxes due to changes by congress.  For example in 1944 the highest tax bracket was 94%.  That is not likely to happen again but the point is that your taxes right now are at least a known factor. 

The Annuity option also has some significant advantages.  By taking the annuity you receive the full price amount over 30 annual payments.  The annuity value is paid through government bonds purchase with the cash value of the prize.  The annuity also prevents you from making foolish decisions that could potentially deplete your entire prize.  Stock market crash, investing in cryptocurrencies or other risky behaviors could completely deplete your winnings if you choose the lump sum option, however, by taking the annuity you are guaranteed to receive those funds for the next 30 years.   

There is no wrong answer to this very complication question.  By relying on your trusted team of advisors (going back to Tip #1) you can make the right decision for you. 

Protect Your Privacy 

We live in an agent where privacy is a lost notion and our private information is regularly gathered, bought and sold by large companies.  As a lottery winner your privacy will become your second most valuable asset.  Hiring a professional IT service to perform a security audit, and establish a good cyber security protocol for your home and family will be essential.  Cyber threats effect everyone but for you the steaks can be much higher.   

Privacy does not just apply to the digital world though.  Sharing information voluntarily with friends, and on social media can also expose you to the attention and publicity you need to avoid.  An experienced attorney who specializes in asset protection strategies can help you protect your privacy in other ways as well such as concealing your true identity when purchasing large assets such as vehicles or real estate, as well as the name on accounts.  Using tools such as LLCs, Corporations, and Irrevocable Trusts, your true ownership and wealth can be concealed from even the most tenacious prying eyes. 

Make Small Changes 

The initial reaction to such a big win is to quit your job, by a mansion and an exotic vehicle and spend half the year on a beach.  Making such a drastic life change will not only raise questions from friends and family but can be jarring to your mental health and can lead to negative repercussions.  Start small, maybe a slightly nicer vehicle and home.  If you truly hate your job maybe look to make a change but don’t stop working.  Small changes in your lifestyle over time will help you adjust to your new wealth and will allow for a better long-term routine. 

While chances are, no one reading this article is going to hit “the big one” many of these tips and strategies can apply to any situation where a large sum of money is received.  Inheritance, gifts, and winnings from a lawsuit can all create similar problems.  Hiring the right attorney can make all the difference.   

Nov 7, 2022 | Uncategorized

Check Out Our Downloadable Guides

Our team has the knowledge and experience to provide you with sound legal advice and representation.

About Cherewka Law

We are a law firm in Harrisburg, PA dedicated to providing comprehensive, highly personalized planning services to individuals, couples, families and businesses.

Start the Conversation

Send us a message today!

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Call Now Button