Far too often, lottery winners go bankrupt after they collect their multimillion-dollars prizes, but financial experts there are ways to avoid falling prey to the curse. NY1's Bree Driscoll.
You did it! You beat the odds and won the lottery. Now what do you do?
"In actuality, 90 percent of lottery winners go bankrupt in approximately five years," says Alan Kahn, a certified public accountant.
Winners may want to yell from the rooftops that they hit it big, but experts advise to do the opposite, to avoid an enormous swell in popularity.
"Not only family and friends, some of whom you may have never known you had, but all kinds of people with investment scams," says financial planning associate Gail Linn.
Experts say to first secure a team of advisors to help you plan what to do with your newfound wealth.
"Get that tax attorney, get your CPA and then when you go in to claim that prize, obtain a financial advisor and have everybody work as a team because this is a huge, huge investment, a huge prize," Kahn says. "In many cases, it will change your life dramatically."
"Don't make any rash moves. Don't quit your job immediately and go on a spending spree," says Linn.
Then there is the question of whether to take the lump sum or annual payments. Experts say it is usually more advantageous to take the lump sum, but that might not be the best choice for everyone.
"The individual that has discipline, the lump sum is the way to go. If you are not disciplined, the way to go is to go with the installment method," Kahn says. "That way, you can't ruin or technically screw up one year's earnings or winnings."
Winners who bought the ticket as part of group should form a partnership to collect and distribute the money, to help avoid the gift tax.
"Those gift taxes can be in excess of 40 percent," Kahn says.
While most of us will never be lucky enough to need this advice, you know what they say: it only takes a dollar and dream.