How would you react if you won the lottery? Or have you already? Managing such a substantial gain requires a well-planned strategy, but it may not be as thrilling as it seems. At Bornazyan & Borazyan LLP, we’re experienced in guiding you through this process. In this article, we will discuss the top 10 steps you should consider after winning the lottery from an Accountant’s perspective.
1. Take a Deep Breath
To cope with your good fortune, you must pause before leaping into the maze of financial decisions. A lottery win can stir a storm of emotions: excitement, disbelief, anxiety, and more. Being calm and composed during this time will allow you to make good financial decisions. The decisions to make after winning the lottery will set forth a chain reaction so its best you make the best decisions in a calm manner.
2. Stay Silent and Secure
You should keep your win a secret before announcing it to the world. If you keep a low profile, you’ll avoid the flood of messages from friends, family, and strangers. As a practical matter, your lottery ticket is now equivalent to a bearer bond — anyone who holds it can claim its value. Secure your ticket immediately in a safe or safety deposit box.
3. Assemble Your Team
In order to manage your wealth effectively after winning the lottery, you need to hire a reliable team comprised of an accountant, an attorney, and a financial planner. In addition to helping you navigate the tax implications of your windfall, these professionals will also help you plan for a secure future and develop investment strategies. As a wealth management and accounting firm, Bornazyan & Borazyan assists individuals in such fortunate situations with guidance and support.
4. Decide on Lump Sum or Annuity
A lottery winnings can be paid out in two ways: a lump sum or an annuity, which provides smaller, yearly payments over a certain period of time. Depending on your circumstances, financial goals, and tax implications, each option has advantages and disadvantages. Your newly appointed accountant will provide you with guidance to determine which option is most beneficial to you.
5. Plan for Taxes
In reality, lottery winnings are subject to taxation, often at the highest Federal rate. State taxes can also apply. Therefore, establishing a comprehensive tax strategy is crucial to ensuring you meet your tax obligations and minimize your liabilities at the same time. Understanding taxation’s nuances can be easier if you hire a tax accountant.
6. Pay Off Debt
By achieving financial freedom, you can eliminate or significantly reduce debt. Eliminating debts such as mortgages, student loans, credit card balances, and other personal loans will ensure you have a fresh start to your new financial journey.
7. Set a Budget
You need to remember the importance of budgeting even when you have won millions. The tendency is to go on spending sprees, but prudent management requires you to create a realistic budget to ensure your wealth lasts and even grows. With the help of your accountant, you can create a budget that balances spending, saving, and investing based on your new income level.
8. Invest Wisely
A lottery win can provide immediate wealth, but investing a portion of it wisely can guarantee ongoing income and further wealth growth. The financial advisor you consult can assist you in building a diversified portfolio that aligns with your long-term objectives and risk tolerance, whether it is real estate, stocks, bonds, or business ventures.
9. Protect Your Assets
With increasing wealth comes the need for asset protection. Trusts and LLCs can protect your assets from lawsuits and creditors while providing financial privacy. Your attorney will advise you on which asset protection strategies are appropriate for your circumstances.
10. Plan for the Future
Last but not least, think about what you hope to achieve in the future. Do you dream of retiring early? Do you want to give back to a charity or ensure your heirs are cared for? The best way to achieve your goals is to set them, discuss them with your team, and come up with a robust plan.
Are you Looking for An Accountant?
The excitement of winning the lottery is unquestionably a life-changing experience, but managing your newfound wealth may seem overwhelming at first, but professional assistance can help.
Whether you have further questions, need customized advice, or are looking for experienced accountants or financial advisors, you can contact us at Bornazyan & Bornazyan LLP. From lottery windfalls to long-term wealth management, our dedicated team is here to help you succeed. We are available nationwide to help you achieve your goals.