Mega Millions is Now at $1.6 Billion
Five things to do if you win the lottery:
Fortunes can change overnight – especially because the winning ticket in Mega Millions is now worth a staggering $1.6 billion – the largest jackpot in U.S. lottery history.
Dealing with a dream financial windfall, though, can bring you new financial issues you might well find unexpectedly challenging.
If you’re planning to win Mega Millions, know that advanced planning can ease your transition, provide long-term stability and eventually calm your emotions. Here are five things to do if you win:
- Get objective advice. Many people will want to give you advice, most well intended, some self-serving. You want to speak with a financial advisor who can provide unbiased recommendations. Choose a financial advisor like you choose other important professionals: reviewing qualifications and looking for a good match with your values and priorities. Financial advisors come with varying credentials, experience and expertise. Interview a few advisors before making a final decision. Ask each how he or she might approach working with you. Listen to your intuition and find someone who you feel listens to you and understands your needs and goals.
- Give yourself permission to succeed. If managing wealth is new to you, you might feel intimidated or even guilty for having money. Emotional barriers may make wise decisions harder. Therapists even coined a term for your situation: “Sudden Wealth Syndrome.” Symptoms include feeling isolated from former friends, guilt over good fortune and an extreme fear of losing all the money. Trust yourself to be responsible and remember to take the long view. You haven’t changed – just your finances have.
- Don’t be intimidated. Few people without specialized training can understand all the documents you see when considering your big-dollar investment options. Don’t hesitate to ask those you trust for advice or admit that you don’t understand everything. Don’t sign any paperwork you don’t understand. Make sure the financial advisor you choose will take time to help answer your questions.
- Take inventory. Before you can set new goals and make long-term decisions, gather information. What do you own? What is it worth? Do you face new tax implications? Identify your real estate holdings, cash, bank accounts, stocks and bonds, retirement funds, insurance proceeds, automobiles, art, antiques and collections. This process can take months, so give yourself time to fully gather all of this important information.
- Set goals. What does wealth mean to you? In an article titled “The Financial Psychology of Four Life Changing Events” in the Journal of Financial Planning, authors William L. Anthes and Shelly A. Lee wrote, “Money not only is a medium of exchange, it is also a substitute for love, a symbol of power, a benchmark of success, a tool for doing good deeds, a source of great anxiety, a scapegoat, a flashpoint in a marriage, and an emotional force of its own.”
Preparing and sticking with a well-managed financial plan can provide freedom from these intense emotions. Again, your financial advisor can help identify your risk tolerance, guide you on appropriate levels of debt, help you prepare for retirement, set up charitable contributions and direct you to a tax specialist.
Good advice and solid planning can take the anxiety out of managing a sudden mass of wealth and let you enjoy the benefits.
As we work with clients, one of the biggest things we see is the lack of communication among generations about money. It’s not an easy subject to broach. Perhaps you had to pay your way through college. Or your parents didn’t help you as much as you expected. Maybe your parents thought you should have pursued a different career. Or you grew up in a household that never discussed money – it was always dealt with quietly.
Family dynamics can be difficult. It’s human nature. However, when there is at least an attempt at dialogue, you may be able to sidestep many of the hurdles that we’ve seen.
- How are your parents supporting themselves financially? Is there a pension? A 401k? IRA? Is there insurance? Is the insurance the type you have to monitor annually – or a policy that requires annual premiums? Is there long term care insurance?
- Do the parents have an advanced healthcare directive? We typically recommend clients in California go to the California Medical Association website (www.cmanet.org) and order a booklet or consult their attorney. See a sample here: Advanced Health Care Directive Kit . An advanced healthcare directive allows someone to appoint a person as the healthcare agent and indicate how you’d like to be treated medically.
- Is there a will or trust? What advisor(s) or attorney has copies of this information? If it’s kept in a safe deposit box at a bank, where is the key stored?
Clients who have had the most success with planning conversations are typically those that start the conversation early. Usually the conversation goes something like this: “As you’re now in retirement, I wanted to understand a little more about your financial/health affairs.” Typical response: “I have everything under control — don’t worry about me/us.”
These types of conversations may need to be attempted multiple times before there is an opening. But, if you start the dialogue early, and try to broach it at a reasonable time consistently, we’ve seen success.
We understand that most people aren’t focused on the details of what is invested where or keeping track of insurance or health care forms. We have seen adult children have success asking a parent to put together a summary of their accounts so that someone other than themselves will have an idea of where things are located or the contact information for their advisor(s). This doesn’t mean that you have to have a full-blown conversation about your parent’s investment philosophy, how their will or trust is divided up, or how much they currently have in assets (if they don’t feel comfortable doing so). It means that you’ll be able to get this information when necessary. If you don’t have this information it may be very difficult to track down accounts, get banks to allow you to cash checks in parent’s accounts, and handle a parent’s finances when they are unable or unwilling to do so anymore. On the health care side, the failure to plan appropriately can have a dramatic impact.
Bob being from the Baby Boom Generation and myself from Gen-X, we’ve been able to “referee” a number of family generational conversations about money and planning. Please reach out if we can be of any assistance whatsoever.