You’re holding your Mega Millions lotto ticket in your shaking hand. You look up at your computer screen announcing the winning lotto numbers, and then back at your ticket. The numbers match. You’ve just won the jackpot.
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While this is the dream come true for any person who’s ever purchased a lotto ticket, it also comes with a lot of potential financial mistakes, risks and dangers. Just what, exactly, are you supposed to do when you come into extraordinary wealth overnight?
In June, when the Mega Millions jackpot reached $1.1 billion, Benzinga interviewed “Shark Tank” producer and “shark” Mark Cuban about how to handle such a windfall. Cuban, an experienced billionaire, had a lot to say on the matter.
First off, Cuban recommended playing the long game. As Benzinga noted, the Mega Millions winner was slated to receive one of two types of payout: a $1.1 billion annuity providing approximately $23 million per year for 30 years, or a single lump payout of roughly $528.8 million.
“Don’t take the lump sum,” Cuban told Benzinga. “You don’t want to blow it all in one spot.”
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Cuban also recommended playing it safe with this kind of once-in-a-lifetime opportunity. That extends most crucially to the temptation to invest your massive winnings, which he suggested all lotto winners avoid. Whether you accept the 30-year annuity at $23 million per year, or take the single lump-sum payout, Cuban was insistent that you not risk your lotto money as an investor.
“You don’t become a smart investor when you win the lottery,” he asserted. “Don’t make investments. You can put it in the bank and live comfortably — forever.”
He’s likely right. The odds of hitting a jackpot twice — once as a player and again as an investor — are exceptionally rare. Why risk financial peace of mind on the hope of making another astronomical amount of money?
“You will sleep a lot better knowing you won’t lose the money,” he said.
Since Cuban can’t be with you every step of the way on your newfound billionaire journey, he also recommended that lotto winners immediately hire tax attorneys. Such an attorney can guide you and your winnings through the convoluted series of state and federal tax laws that come with winning a huge sum of money overnight, and keep the IRS at bay.
Fidelity offers an additional recommendation: create a strategy for giving. First, decide how you’ll handle money requests from family and friends. Then consider whether you’ll support charitable organizations. Consult your tax attorney on these decisions, as laws around gift taxes and exclusions are complicated, and you’ll want to structure your charitable donations in a way that minimizes your own tax liability.
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This article originally appeared on GOBankingRates.com: Mark Cuban’s Unconventional Lottery Advice: What He Says To Do If You Win Big
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