I know this is everybody’s wish. To some day win a lottery. Of course, we have a greater chance of getting hit by lightening. Well, we can always hope we win. Believe it or not, some people have that factored into their retirement planning.
You won the lottery. Congrats! I know, but for pretend, let’s say you did. I once had a client who won $100k and you know what? She spent it all in one year despite our best advice. So what do you do now?
Once you’re done screaming and dancing in a shower of champagne, take a moment to gather yourself and start thinking about the more pragmatic aspects of your new life as a potential multimillionaire. So, what will you do with the cash? Do you take the lump sum or the annuity paid out over time? How much will you give to charity, friends, and family?
Keep your mouth shut
First things first, according to experts: Keep your mouth shut. Before you broadcast your sudden windfall to the world, and even before you contact lottery officials, you’ll be wise to surround yourself with a team of lawyers and financial advisors.
Most provinces will not let you claim the prize anonymously, which means you’ll need to act fast to protect yourself before you’re inundated with vultures or new-found relations. And while this might seem obvious, don’t forget to document your win. Make copies of both sides of your lottery ticket, and then lock it up somewhere only you can access it.
Get to work
Then, get to work. And it will be a lot of work. To some, winning can be more of a curse than a blessing for some, just in all of the work that has to be done.
Look for lawyers
Hiring a lawyer should be a top priority. And not just any lawyer. Find an attorney who has experience dealing with people with this level of wealth, because it is different. Your financial planner can usually provide you with a few referrals. Always interview a few. That also means aiming for a specialist at a large national law firm.
Transferring winnings to a trust
How about your privacy? Many Canadians winners have argued that they should be able to remain anonymous. The concept of transferring the ownership of the ticket to a trust and have the trust collect the winnings. Lottery corporations will stick to their guns and argue that only an individual or group of individuals can claim the prize. One winner, after 21 months of haggling, had thew trust transfer the ticket back to himself and he collect his prize will full publicity. The lottery people want to share in your glory. If you play the lottery in Canada, it’s a safe bet that you’ll be smiling for the camera.
Find financial advisors
Next up, you’ll need an accountant and a financial advisor to protect your wealth from creditors and predators. Again, you’ll want to look for experts at larger institutions who have experience figuring all this out. Your neighbor, Gary the CPA, might be a great pal who’s done your taxes before, but he almost certainly hasn’t dealt with an influx of wealth like the one you, lucky lotto winner, are dealing with.
Another thing to keep in mind: It pays to be a good person. One of the biggest winners of your lottery win may be CRA depending on how you handle windfall. While lottery wins remain tax free, depending on how you invest your windfall may lead to some serious tax issues. One thing you can consider, for example, is offsetting future tax liabilities by using philanthropy as a way to receive a charitable deduction.
Once you’re lawyered up and have a solid financial team you trust, have your advisors look over the lottery’s rules before you sign the original ticket.
The bottomline
The rest is mostly personal finance: pay off your debts, set up savings for college or university, max out your TFSA and RRSP, diversify your investments and keep up a robust emergency fund. Your team of advisors can manage it all for you.
But there’s one big piece of the lottery puzzle that you can’t farm out to lawyers, and that’s your mental health. Plenty of past winners serve as cautionary tales about the psychological impact of sudden wealth, and all the changes that come with it. Its best being informed Keeping Life Current.
