August 14, 2013
I’ve written three best-selling books on what to do when you win the lottery, but really it can be boiled down to five simple points.
Paul White of Ham Lake, Minn., violated all five of my rules within 18 hours.
My five rules are:
1. Don’t tell anyone that you won.
2. Take some time to get your financial systems in place before you claim the ticket.
3. Find financial advisers who have worked with more money than you have.
4. Take the money in annual payments, don’t take the lump sum.
5. Give money back to charity.
People with millions of dollars blow all their money, all the time. A report by the National Endowment for Financial Education said that 70 percent who receive a lump sum, from any source, run through it in a few years.
Since most people blow the money, Mr. White is bucking the odds under any circumstances, but he has dramatically made his life harder.
An article by Jenna Ross in the Minneapolis Star Tribune noted that “winners typically wait for a few days as they consult their attorneys and financial advisers,” but White drove straight to the Minnesota lottery headquarters as soon as he found that he had a winning ticket.
The same article noted that White did not take the annual payments, but took a cash payout of $86 million.
There are six states that allow lottery winners to claim the money completely in anonymity, but Minnesota is not one of them. However, you are not required to have a news conference and hold up a fake check.
The last thing a person should do is tell the world that they came into millions of dollars that they never planned on having. White did it anyway.
In fact, he held up a check for the wrong amount of $149,400,000. He was actually getting $86 million as he did not take the money in annual payments and after the state withheld income taxes, he has about $58 million in his pocket.
Most people can live on $58 million if they handle it right. So far, White shows few signs of handling it right.
Kevin Wall had me on his CBS Las Vegas radio show on Friday. He played an interview with White who said that he had not thought about getting legal or financial help, but had “faith something good will happen.”
White had better be praying that a good advisory team gets into his life and quickly. Just from the little that I know about him, he has major problems on his hands.
I always tell lottery winners that a tax and estate planning lawyer need to be part of their team. The Star Tribune article referenced White’s “partner” for four years and that he had children and she had children.
Is she getting part of the money? If so, how much? What happens if he drops over dead in the next five minutes? Having $86 million puts you in a major league estate tax category. Does he have a will? Who would get his money if he died? Does he have guardians or conservators named for his children? Will he include his partner or her children?
These are all good questions to answer before you race to the lottery office and cash the ticket.
But as the saying goes, “dying is easy; it’s the living that’s hard.” White has a host of immediate financial concerns.
Everyone he ever met or thought of meeting is going to be looking for a handout. Also, thousands of complete strangers. White noted that he was worried about his family’s safety, but the time to set up security systems was before he told the world he had the money, not after.
At age 45, he plans on quitting his job as a project engineer and never working again. He does not specify what he plans on doing with his new found free time. His first thoughts were about buying several cars, not about giving back to society, and said that he expected his sister to “help him pick charities worthy of some cash.”
I don’t know his sister’s background, but I suspect she is not an expert in the financial and tax ramifications of charitable giving or how to set up a foundation that will best meet their goals and objectives. I know plenty of experts in those fields, but most of them don’t advertise or come knocking on your door.
My late sister was a chef. She knew everything about gourmet cooking, but would not be my first call to handle a multi-million dollar charitable donation strategy.
White needs a team of first class advisers. In the worst way. He has made the job a thousand times harder by running down, cashing in the ticket and taking the lump sum, but there is still time for a crack team to perform damage control.
Something tells me that will never happen.
Along with the high powered estate and tax issues, White has other big time problems. The London Daily Mail says that his children are 16 and 14. Thus, I assume he has a former spouse who is supposed to receive child support. I hope he has been paying on time. Pedro Quezada, who won the Powerball in April, was not and his jackpot landed him a trip to court, where he had to fork over $29,000.
I’m not sure how the law in Minnesota works, but I suspect that if he is paying child support or alimony, that number just went up.
I’ve spent my adult life working with people who get large sums of money. It’s supposed to be the happiest time of their life and often it is the worst. The wife of Powerball Jack Whitaker, who won $275 million in Hurricane, West Virginia in 2002, said that she wished they had torn up the ticket. After death, divorce, wild spending and financial pressures overturned their lives, I can see why she wished it had never happened.
Abraham Shakespeare in Florida wound up dead, allegedly because of his lottery money.
There are plenty of lawyers, advisers and experts to help a person who wins the lottery. There are also plenty of books and easily accessible information.
White could have purchased any of my books for less than 20 dollars.
If he taken a day to stop and read one before racing to the lottery office, my bet is that his life would have been much better off.
White overcame a 171 million-to-one shot to win the Powerball.
He is going to need the same kind of luck to hang on to the money and keep it from destroying his life.