If you won the lottery, you might dream of buying stunning beach houses, world-class vacations, new cars and more. But it’s also important to have a team of financial experts by your side in case you do hit the jackpot, especially if you want to avoid going broke. A study of Florida lottery winners found that 1% of those who won a large sum went bankrupt in the first two years. Those who won smaller prizes were half as likely to file bankruptcy but still faced high risk.
The problem is, mountains of unearned money are irresistible to greedy friends and relatives, con artists and charity cases, who quickly whittle away your winnings. And sometimes, it’s the winners themselves who can’t get out of their own way. Evelyn Basehore beat one in 15 trillion odds when she won multiple multimillion-dollar lottery prizes in New Jersey in 1985 and 1986, but her life soon fell apart. She gambled away much of her winnings, gave too many gifts and spent recklessly, and ended up moving into a trailer park by the turn of the millennium.
Another big issue is taxes. Lottery winners are required to report their winnings to the IRS, and the top tax rates in most states are higher than they would be for the average working person. That’s why it’s smart to keep your winnings private and consult with a CPA, lawyer and financial advisor to handle your wealth.