Hit the Mega Millions jackpot? Here's some advice on what to do next
A drool-inducing $220 million is up for grabs in Tuesday night's Mega Millions lottery drawing. Before all that green goes to your head, we asked three Atlanta-based experts what should be the first five things on a lottery winner's to do list.
Barry Berlin, managing director of the Atlanta office of Atlantic Trust, a private wealth management firm and subsidiary of Invesco:
• Cold call successful people and ask them to recommend financial advisers. Hire a financial adviser, who doesn't work on commissions.
• Pick a place to park the money on the first day. Think safe, short-term and liquid instruments, such as Treasury bills. Don't put it all in a single financial instrument.
• Develop long-term plans for managing the money.
• Set a limit on immediate spending and don't go over it.
• Don't try to change everything about your life right away. "It takes time to get used to what the funds can do."
Sheryl Pressler, consultant and former chief investment officer of the nation's largest public pension fund, the California Public Employees' Retirement System:
• Keep quiet and don't rush to claim your winnings.
• Get a lawyer with expertise in handling lottery winnings. Consider putting ownership of the ticket into a limited liability corporation or partnership to limit potential tax liability and to obscure your identity.
• Don't change anything major in your lifestyle for the first year.
• Take courses to get educated about money management and investing.
• Hire a fee-based financial adviser who is at a reputable firm and experienced in handling large sums of money.
Stephanie Casteel, partner in trusts and estates for King & Spalding:
• Get an unlisted phone number before claiming the prize. A lottery winner she represented was inundated with calls, packages, flowers and balloons sent by financial advisers, people seeking money, etc.
• Put the unclaimed ticket somewhere safe, such as a safe-deposit box, until you are prepared to claim it.
• Hire a good tax or trusts and estates lawyer. Winnings can incur federal and state taxes of up to 41 percent, plus there can be additional taxes on gifts to people. Later, hire an accountant and a financial adviser. One financial adviser she's familiar with charged a flat $100,000 a year.
• Protect yourself from liability. Put ownership in a legal entity, such as a limited liability corporation to reduce potential liability from lawsuits and limit gift taxes.
• Be wary of friends. "Everybody has the next great deal."
Really good advise. I can think of a potential hazard on each one of these listed if you don't plan ahead. I guess protecting your investment (winnings) is the key, but most of all " Yourself ". Thanks Todd.
Joe
Good Info!!
Nice! Thank you.
Good advice.
thx....... good advice
Thanks
Okay, what about people who don't want to invest the money at all? Or, if you're really bad at money, just take the annuity.
Annuity is Great too. Age is a factor.
With the current mega jackpot this high it maybe better to take the Annuity.
Current mega jackpot 270 mil = 10+ mil /a year/26 year.
Less pressure, Money keeps coming in.
control spending, keep a budget
Say to moochers"money tied up"
Less big investment mistakes( no rush to invest) (avoiding scams) ( Current stock market is bearish )( Real estate balloon has popped )
Pay less taxes
I read most finanical advisors say take annuity.
It is clear that all of the advisors are biased toward fee based planners (I happen to not be a fee based planner, but my clients all know I do an excellent job for them).
So this is what I would do when I win the Mega Millions jackpot:
1) No need to cold call celebrities...I will meet with my Primerica RVP and invest a large portion of the funds in various load mutual funds.
2) Consult with my PLPP law firm about setting up trusts and go through estate planning. Have already determined I would claim the winning ticket in either a trust or LLC.
3) Get a PO box...for all lottery mailings.
4) Reinterview tax accountants.
5) Continue getting my free personal finance education through my trustworthy Primerica representative who happens to be paid based on commissions. FYI a person being paid via commissions isn't the problem; the problem is people making unsuitable recommendations merely to garner more commissions (i.e. a stockbrocker churning investments, a financial rep recommending an annuity when a rollover to an IRA fits the bill, etc.).
6) Set a budget but still buy desired auto, clothes and home.
Total BS........ Commision based Financial Planners are worse Thieves than Lawyers. They get their commissions upfont so why would they care if the investments they put you in lost you money. They already got paid........... On to the next sucker......... If you lose money they just blame it on market conditions, not their investment recomindations that they already got paid on.....this sounds like a spam for Primerica. Just my oppinion. Be very carefull investing a large sum of money. MY best advice. interview many so called financial planners, take you time, make them show you their track record. Heck with that kind of money ask for a guarrenteed return and see what they say.
Hoping to hit the big one on Friday!
goodluck to all,
Don
YES ...thanks Todd......this is the stuff i'm looking for,,,,just hope i get to use it someday............
NEVER take the annuity...regardless, that is just the dumbest thing to do and exactly what they want you to do.
HMMM.... You must love where you work. I have 2 issues wih your suggestion... a LOADED mutual fund as opposed to a no load mutual fund. Who says Primerica is better or as good as Vanguard and Fidelity? And yes I watch Suze Orman.
Of the 3 advisors I would actually want to work with either Sheryl or Stephanie. The answers are more in line with the way that I think. Yes you can find a great advisor but not everyone wants 20% returns. I wonder how it would be if i bought into AAA muni bonds for the first 5 years with a ladder maturity schedule and then after they all mature rethink how i want to invest. I would be happy with an income stream of 10k a month with the rest reinevested. I know the first thing I would buy for myself are bionic hearing aids to replace the ones I have.
A few people have spoke about corporations....anyone know how to do that?
FYI Mr. Informed Showme3,
There are different ways that fee based planners get paid: 1) some charge a flat UPFRONT fee (so that destoys even your problem with commissioned financial reps); 2) some charge a percentage of the assets you will invest with them (i.e. commission); 3) some charge a combination of the two previous; 4) some charge a sliding scale UPFRONT fee. All of these compensation types are UPFRONT...people who devote themselves to the financial services profession happen to have living expenses just like everyone else and last time I checked, no one does work for FREE. As I stated, the issue isn't how a person is compensated. The issue is whether the person makes appropriate and sound recommendations for one to follow. FYI those who work for Primerica DO care how their clients portfolios perform.
When I think of fee based planner I think of a FLAT fee not a sliding scale or fee + commission.
If Planner X charges 100k to manage 100million and Planner Y charges 1% of 100million and Planner Z charges 100k + 1%.. I would go with Planner X. I think us "outsiders" think of commssion based planners as those who get commssion when you buy and sell securities. I would only want to pay a fee to buy something not pay a fee when something is sold.
Yes I do love where I work. Yes I know that Suze Orman as well as a few newspaper financial writers advocate no load mutual funds over load mutual funds. I used to be on the side of the no load argument...I used to invest with T Rowe Price and diligently read all of the "educational" materials sent to me as well as what is on their website. I invested according to my risk/time horizon profile. And during 2000, I watched my nice IRA investment get pared in half and never recover. The way I look at it, no load equals no help. When it comes to helping people reach their financial goals, the argument isn't whether mutual funds of a certain company are better than another companies mutual funds (FYI you might want to speak with a Primerica representative to find out how good the mutual fund platform is). Being properly diversified and being a disciplined investor are key to allowing time for compounding to work for you...and that typically involves people being properly educated about investing. If I just wanted an investment plan, I would have had to pay at least $500 for it with Vanguard and T Rowe Price and I know of other firms that charge much more than that. I also met with a Merril advisor and had a complimentary meeting with a T Rowe Price advisor (that is how I know about the $500 investment plan), and I can tell you that I walked out of those meetings not really knowing any more about investing than when I walked in. Sure I was informed about what they had to offer, but neither of them really educated me about investing. My question I have for you is this: Would Suze Orman be willing to meet with you one on one and help you with your finances? If a person is not willing to do that, then I would just put their advice in the general nice to know category.
"FYI those who work for Primerica DO care how their clients portfolios perform."
What about Charlie, the guy who's quitting in 4weeks? He might be a great guy with loads ofintegrity, but he certainly doesn't have a financial incentivebased on the long term results of my portfolio. If he canoffer me three choices and one of them puts more money in his pocketthan the others, that's a powerful incentive to point me in thatdirection, especially if he thinks all three choices are good.
"The issue is whether the person for one to follow."
That's absolutely true, but the problem is figuring out ahead oftime who's going to make those appropriate and sound recommendations.It's very easy to tell people to go out and find a good advisor, butnot so easy to actually do it. As with any other profession there aregood financial advisors and bad ones, and there are honest ones whowill accept the lower paycheck for giving you better advice, andthere are some who will give you advice that isn't as goodbecause it will put a few more bucks in their pocket. Plenty ofadvisors will offer you honest and excellent advice when they are compensated with comissions from products they sell you,but there's an awful lot to be said for advisors who arecompensated based on how well your investment turns out. Failing thatoption, an advisor whose income depends on their advice rather thanwhat they sell makes sense.
All of you who have responded to my post have just missed the point entirely. The facts are that the average equity investor nets a 4.3% return largely because they act based on their emotions. This barely outpaces the rate of inflation. Meanwhile, the S&P 500 has returned nearly 12%. Financial service reps who are focused on educating their clients and establishing good relationships help counter that occurrence.
In response to your comeback on my FYI, I get the impression that you think that people who work for or at other companies DO NOT quit? That's what some people do. But I know that all good companies have systems in place to address that occurrence as well.
Nitpick all you want...I can just say that my clients are winners and I am a winner too.
"In response to your comeback on my FYI, I get the impression that youthink that people who work for or at other companies DO NOT quit? That's what some people do. But I know that all good companies havesystems in place to address that occurrence as well."
Wherewould you get that impression? Somebody who isn't quitting has theincentive of wanting you as a repeat customer, and somebody who isquitting doesn't have that incentive. Wanting your continuedbusiness is an incentive for those who are paid for the products theysell you to sacrifice their own short term gain by selling you a betterproduct (for you) that pays them less. Somebody who isn't paid based onthe product they sell you has nothing to gain by selling you aninferior product whether they're quitting or not.
What is themost comon system for making sure a rep who's quitting won't put hisshort-term commissions ahead of my interests?
I would never put down someone else's job, so I am being careful with my words. Primerica has tried to recruit me for years. It's not a company I would ever represent. Their representatives have been brought before the SEC many times. Typical news story:
http://www.bizjournals.com/sanfrancisco/stories/2004/11/01/daily54.html
This is the best Free advice I ever heard via this website I Love it....
Who cares what 'they' (the state lottery commission) want you to do. I don't really see the point in investing the lottery money you win (talking about many millions of dollars type winnings). You've already made more than a reasonable person could expect to spend in a lifetime. Its pretty much just a matter of making sure you don't spend it all in the first 5 years.
That's why an annuity has its advantages.
If you don't see the point in investing it what would you do with it? The only choice besides investing it are to spend it all or keep it under your mattress and take some out now and again.
Advisors and planners or just more leeches? Screw all of them. All I need is a 60 month CD, and maybe a tax attorney.
In terms of actual dollar value, they save a lot of money and you get a lot less when you take the annuity. With that amount of money, there are a lot of different investments you can have access to as an accredited investor that can protect your principle and deliver a nice income stream (like untraded REITs). Taking the annuity just so you don't spend it all at once is absurd.
Were I to win that $220m, I definitely would ask for cash, not an annuity. That's 50% gone right there. Then, after the state and federal taxes devour another 41% plus (being a non-U.S. citizen) I'd probably be left with a little over 60 mil. What would I do with it? Make sure my immediate family is taken care of - stick a few mil away in the bank and give away the rest to the poor and needy through enterprises or charities that I know really help them. To be honest, I really don't like money too much - but I do like what it can do to truly help others who really need it. In the right hands, its the perfect tool.