Posted: Tuesday, Apr 16,2019 | Time: 11:40 am | Edited by: The Lottery Lab Staff
Imagine all the money you are going to get after winning a lottery jackpot. All the purchases you are going to make after winning the jackpot. A bigger house, fancier car, you’ll throw parties, take extravagant vacations, and everything. But when you win, it is no longer a game. There is a lot more involved than cashing that fat check. You will have to hire a legal team which can easily cost you six figures.
Before starting your wild shopping spree you need to hire a legal team that can manage complicated tasks involving taxes, trusts, and other legal formalities. There are various important decisions involved including lump sum vs. annuity payouts, newfound fame, FDIC insurance limits, long-forgotten “relatives”, exes, federal taxes, state taxes, more taxes, estate planning, and other investment considerations.
Here is a brief discussion of various services you will need to best handle your instant fortune and its expenses
The first thing you need to do is make a call to a certified financial planner to help you navigate through the first important days when you’re still a naive millionaire. Make sure the financial planner you are considering, has the official CFP designation. One of the first concerns is going to be tax minimization. Your financial team is likely to recommend ways to legally shield yourself from the IRS, as much as possible. They are going to manage your money, handle your estate, insurance, and tax planning, and might refer you to specialists in these fields to address immediate needs.
Work with your CFP team to craft a long-term investment plan to balance your future goals and dreams. By working together, you can focus on wealth preservation and create a stable stream of money for life. Keep in mind that people are going to try to woo you with their hot-shot stock-picking prowess or quick-money schemes. Avoid them and look for a fee-only financial planner on an hourly basis.
Estimated cost: For a basic financial plan: $2,500-$5,000.
For putting a financial planner on retainer: $100,000-$200,000.
To have the planner manage your investments: 0.25% of total assets.
After winning a jackpot, the first decision you’ll have to make is the type of payout you want, i.e. lump sum or annuity payout. Sometimes, answers to these questions are beyond the scope of seasonal H&R Block tax preparers. You will need the advice of someone who is aware of all the nuances of both the federal and state tax law. Be ready to spend several hours a month with your tax attorney during your first year as a multimillionaire.
Estimated cost: $60-$300 or more per hour
A legal team can help you create an “entity” (like a general or limited partnership, limited liability company, or trust) to help you claim your winning without putting your name on the front page of newspapers and news channels. A trust will not only protect your identity but will also help your money pass through to heirs without being subject to probate laws and inheritance taxes. The trust also comes in handy in states with rules that allow only a single payee per winning ticket when you are part of a winning lottery pool.
Estimated cost: For normal situations: $1,500-$8,000
For situations with complicated lottery winnings windfalls: $5,000-$10,000
If you do not wish to prepare your own taxes, you can hire a good CPA for a flat fee, costing no more than $500 to $1,000 to do the paperwork. Plan to pay at least $50,000 a year for them to provide the legal accounting talent to explore ways you can legally shield yourself from IRS.
Estimated cost: $10,000-$50,000 a year
There are a number of relationships that you can set up with your financial management team. Before hiring a bunch of professional advisors to manage your winnings consider an “in-house” office that is dedicated to your needs. Sometimes, having dedicated professionals running everything from your taxes to maintaining your personal expenses can simplify matters. Experts say, “hiring your own full-time staff makes more sense once you hit $100 million in assets or so. The cost could exceed $1 million a year for someone with a jackpot fortune, but that may wind up being both easier and cheaper than engaging a series of outside pros.”
Estimated Cost: $500,000 to $1 million or more
Once you have millions of dollars, normal liability situations can become complicated. Before you won the lottery, the guy you bumped in the parking lot just filed a claim against your auto insurance. After winning the lottery, he sees all kinds of liability claims against you. Liability insurance offers extended coverage for lawsuits against you, including accidents that can cost you more than regular homeowners or auto policies cover. This kind of coverage is often referred to as an “umbrella policy”. It is useful in protecting you from things like trip-and-fall lawsuits, personal injury claims, or other exceptional concurrences that could affect your bank accounts and future earning as well. They are usually offered in $1 million increments and a lottery winner is going to need more than $1 million in coverage as they are multi-millionaires.
Fortunately, buying insurance in bulk can help you save money. After the first million in coverage, the next will cost you about $75 and the next will cost $50, and so on.
Estimated cost: $200 for $1 million of personal liability coverage
After winning a lottery, be ready to be bothered constantly by your friends, relatives, and even strangers to ask for money from you. They think that since the money came easy to you, you should just throw it away. To protect yourself from incessant ringing from media, scammers, well-wishers, purchase a few cheap cell phones and set up a no-contract wireless plan. Destroy the contacts and cell numbers that get out of your immediate circle of pros, family, and friends.
Estimated cost: $35-$40 for a month of service.
Good help is not difficult to find when you do your homework sincerely. Do a background check to find out the record for the complaints and disciplinary actions before hiring any professionals. Be as involved as you can be and make your legal team explain in detail every recommendation they make. After all, the final decision is yours and you must be ready to be accountable for your decisions.
Estimated value: Priceless