However, Jason Neufeld, Esq., Founder and Managing Partner of Elder Needs Law, warns that the winner’s recent wealth may not stick around for long.
According to a study by MIT Press, lottery winners are far more likely than the average American to declare bankruptcy within five years of hitting the jackpot. Neufeld believes the reason for this phenomenon is that most of those lucky winners mismanage their wealth.
“So many lottery winners feel like their newfound cash flow is endless, but it’s decidedly not,” Neufeld explained. “Lottery winners often end up in worse financial states than before they hit the jackpot, and it’s such a shame that their financial blessing turned into a burden.”
Where Do Lottery Winners Go Wrong?
Neufeld explained further that most lottery winners fail to anticipate the costs associated with being the winner of a huge jackpot. For example, choosing a lump sum payment over an annuity payment option reduces the amount of your lottery winnings automatically.
Then there are federal taxes that need to be paid on the prize money, state taxes if the winner lives in certain states, and estate taxes when the winner’s heirs eventually inherit their wealth.
Since the resulting payout is often far less than the winner anticipates, they often blow through the bulk of their cash with the extravagant plans they’ve already made.
“It’s not easy to anticipate costs and manage that kind of money on your own,” said Neufeld. “That’s why wise estate planning strategies are essential when you come into a large sum of cash.”
Estate Planning Strategies for Lottery Winners
To avoid being another lottery winner statistic, Neufeld recommends a few options for estate planning tools to protect their cash and make it last for multiple lifetimes.
Some of the best estate planning strategies include the use of:
- Tax planning to minimize Uncle Sam’s cut
- Trusts to shield your wealth from creditors and probate
- Whole life insurance policies to ensure available cash to loved ones
- Investments to help grow your wealth
According to Neufeld, some of the most effective estate planning strategies aim to protect an individual’s wealth and preserve it for generations.
“Putting the right strategy in place is crucial when you’re in for a big payday,” Neufeld said. “Having an estate plan can have an astonishing effect on how long your wealth will last—whether it’s a few years or for the duration of your children’s lives, your grandchildren’s lives, and beyond.”
Elder Needs Law has four locations in Florida:
- Aventura — 2641 NE 207th St., #100, Aventura, FL 33180
- Plantation — 8551 W. Sunrise Blvd., Suite 102, Plantation, FL 33322
- Miami — 8950 SW 74th Ct., Suite 2201-B, Miami, FL 33156
- Boca Raton — 2000 Glades Rd., #312-A, Boca Raton, FL 33431
About Elder Needs Law
Elder Needs Law is an experienced Florida law firm with a skilled and compassionate team of legal professionals. Serving all of Florida, the law firm provides essential estate planning services to clients looking toward and planning for the future. Whether clients are looking for long-term care solutions or need an estate plan to ensure their loved ones are cared for when they’re gone, Elder Needs Law is there to help.
The team handles cases in various practice areas involving estate planning, including trusts, asset protection, wealth preservation, probate, and guardianship.
Book a consultation with one of the law office’s knowledgeable estate planning attorneys or visit Elder Needs Law at one of the firm’s four office locations in Florida.
