Four financial advisers reveal what to do if you ever win the lottery or receive a surprise inheritance (2024)

You've checked the numbers over and over.

And yes, each time they have matched. You've just won a life-changing jackpot.

This is a hypothetical most of us can only dream of— not for one SA ticket-holder who won the entire $150 million Powerball jackpot last night.

But sometimes it's fun to wonder: "What would I do if it was me?"

If you ever find yourself receiving an unexpected windfall, whether it be from an inheritance or lotto win, it's important to ensure you receive the maximum benefit from your good fortune.

So we spoke to four financial advisers to get their tips on what to do if you were to win big.

Give yourself time to think

The first step would be to take a minute to think about the situation, experts told us.

Because the fact is that many people who come into sudden wealth end up losing it.

US research by economists Hankins, Hoekstra and Skiba found that lottery winners were more likely to file for bankruptcy than the rest of the population.

RSM Financial Services Australia director Grace Bacon says this ties into sudden wealth syndrome.

"Winning lotto is everyone's dream, but coming into sudden wealth can place you under enormous stress," Ms Bacon told the ABC.

"Sudden wealth offers greater choices, but also greater anxiety because you are forced to make decisions you might not have otherwise made.

"Decisions like 'do I pay off debt, treat the family to a big trip, or invest for the future?' are some of those."

Four financial advisers reveal what to do if you ever win the lottery or receive a surprise inheritance (1)

This is why Daniel Albanes, Liston Newton head of wealth and senior financial advisor, says you should avoid making any rash decisions.

"It may be exciting to think about quitting your job, going on a long holiday, or buying a sports car," Mr Albanes tells the ABC.

"And while it's not wrong to do any of these things, you do need to take a step back and define your goals over the short, mid and long-term so you can make the most out of your good fortune."

Think about your relationship with money

Gretel Chiswell, owner and financial planner at Gretel Financial, says now would also be the time to revisit your relationship with money.

"Were you good at managing your finances beforehand? If not, having a million dollars in your account won't automatically make you financially savvy," Ms Chiswell told the ABC.

"Many winners go bust because they make the same mistakes on a larger scale.

"Recognise your limitations to manage your windfall wisely."

But one thing you have to remember is that winning the Powerball jackpot is extremely rare.

In fact, the chances of winning the division one prize in Powerball are more than 134 million to one.

You are more likely to be struck by lightning multiple times than win Powerball.

A 2023 Australian Institute of Health and Welfare study found that 30 per cent of Australian adults gambled on lotteries at least once a month.

Pay off all your debts

Tie up any loose ends.

Your Wealth Consultants financial adviser Kurt Ford says paying off any bad debt, especially consumer debt, is a great start.

"Paying off any immediate bills and unavoidable commitments can relieve you from rushing into any major financial decisions that may not pay off," Mr Ford told the ABC.

"Paying off your home loan is also a sound strategy, and at the very least, having it in an offset account is a good idea until you have a plan in place.

"Although, it's important to understand that unless we change our behaviour, we may end up in the same position at the end of the day."

Four financial advisers reveal what to do if you ever win the lottery or receive a surprise inheritance (2)

Put together a support team

Seek professional advice as soon as possible.

A solid financial plan can ensure the funds are sustainable and that you don't mindlessly make poor spending decisions.

Here are a few professional advisers you should consider, depending on your new-found level of wealth:

  • Financial adviser
  • Estate lawyer
  • Accountant
  • Legal adviser

Ms Bacon says a qualified financial planner will help you set immediate, medium and long-term plans.

"I suggest a 'bucket strategy' so that you have some funds for immediate plans — maybe that family holiday you've been dreaming of — to celebrate your win but that still allows for longer-term investments," she said.

"I also suggest parking the funds in a high-interest-bearing account until you've had the time to really think about priorities, and to avoid impulse purchasing while you're still on the high of seeing your numbers drop."

Mr Ford says a financial adviser can also put things into perspective.

"We would really need to take stock of where you are now and understand that a lump sum of money won't fix all your problems and concerns," Mr Ford said.

"Nor will a large sum of money automatically set you up for life.

"There's a previous study out there about how previous lottery winners end up poor after winning — you don't want to become a statistic."

In 2019, a Sydney nurse won a $107 million Powerball prize.

She shared her advice for the next person who might become the next multi-millionaire.

"Run, don't walk, to a really good financial advisor," she said.

"It takes two weeks for the money to come through. I used those two weeks to engage a financial advisor who I trusted."

And one last piece of advice from Ms Chiswell:

"You don't need to disclose that you're a millionaire right away.

"Focus on building a relationship with a planner who understands your needs and goals, then engage them to help."

Explore investment options

When it comes to investing, there's a lot to choose from — property, shares, and other assets.

And Ms Chiswell says a diverse range of investments is the key to a successful future.

"Diversifying can help manage risks, ensuring growth and liquidity is always available.

"Make sure to understand the best way to own your assets, whether in your personal name, a company, or a trust.

"This ensures protection from liabilities and allows for tax efficiency strategies."

And what about superannuation?

"Putting money into super too early will mean the monies cannot be accessed until you meet retirement age or condition of release, so if you're 20 or 30 that might not be your best option," Ms Bacon said.

But before you dive into a specific type of investment, make sure you know what you're specifically trying to achieve and when by, says Mr Albanes.

Decide who you will and won't tell

And how you tell them.

Wait to spread the news of your winning only after you have a communication plan in place.

Family and friends are the ones closest to you, but they can become a threat to your windfall — you may feel guilty or obliged to help them.

"Within your circle of friends and family, there is always bound to be someone who has financial problems and will be asking you for assistance," Ms Bacon says.

Try to also avoid seeking financial advice from family or friends, Ms Chiswell says.

"While they might mean well, their suggestions could be influenced by their own interests."

This is where a financial adviser may come in handy.

They could help you put some guardrails in place to determine:

  • What's for you
  • What you intend to give away
  • What you intend to leave for future generations

American entrepreneur and founder of Finance is Cool, Haley Sacks, suggests people go dark after a lottery windfall.

"Don't tell anyone, not even your family," says Ms Sacks, who goes by @mrsdowjones on TikTok.

"Remain cool, and do not quit your job.

"Delete your social media, get a PO box, and change your number."

Loading TikTok content

Are lottery winnings taxed?

In Australia, lottery winnings are classified as tax-free income.

The ATO says you don't have to declare winnings from "ordinary lotteries" — think lotto draws, raffles, or meat trays at your local pub.

However, the interest earned from your winnings is taxable.

Let's say you win a big lump sum of money and you put it in the bank.

You'd have to declare any interest you earned from that money in your tax return.

Disclaimer: This advice is general in nature and doesn't take into account your personal circ*mstances, financial situation or needs.

Posted, updated

Four financial advisers reveal what to do if you ever win the lottery or receive a surprise inheritance (2024)

FAQs

What would you do if you won the lottery answers? ›

The survey did find some more practical responses when asking Americans what would be the first thing they would do with the all that money:
  • 29% - Pay off existing debt.
  • 15.9% - Put money aside to take care of family/friends.
  • 15.0% - Invest the money.
Oct 11, 2023

What financial advice would you give to a new lottery winner? ›

Consider an annuity.

Everyone's situation is different, but I'll typically recommend that lottery winners purchase an annuity to guarantee future income. Because of how they won their money, it's not uncommon for lottery winners to turn to gambling.

What is the first thing you should do if you win the lottery? ›

Before you do so, there are things you should do:
  1. Safeguard the ticket.
  2. Be choosy about who you tell about your win.
  3. Engage a Lawyer and Financial Advisor.
  4. Decide on taking the lump-sum or annuity option.
  5. Plan on income taxes in two parts.
  6. Engage in tax-focused estate planning.
Jan 31, 2024

What is money that is received unexpectedly like inheritance or lottery winnings? ›

Windfalls refer to unexpected or sudden financial gains that individuals receive, often in the form of a significant sum of money. These windfalls can come from various sources such as inheritance, lottery winnings, or unexpected bonuses.

What's the smartest thing to do after winning the lottery? ›

Get into investing

Saving money will only enable you to keep it secure for a while, but investing will allow your money to grow and generate passive income. While investing might not be the most interesting thing to think about after winning the lottery, it is definitely the smartest thing to do.

How do you protect yourself if you win the lottery? ›

If You Win the Lottery, Here's 5 Tips!
  1. Protect the Ticket. Sign it and place it in a safe place. ...
  2. Protect Yourself. Don't tell anyone! ...
  3. Protect Your Winnings. Speak with a financial planner, lawyer and Certified Public Accountant, or CPA. ...
  4. Protect Yourself From Yourself. ...
  5. Protect the Rest of Your Life.
Aug 11, 2023

Where do you put your money when you win the lottery? ›

Your current bank or credit union is a good place to start but be sure to verify that the amount of your deposit is federally insured. If the amount of your deposit exceeds the level of insurance, consider dividing your prize funds between two or more financial institutions.

What not to do after winning the lottery? ›

5 Things Not To Do If You Win The Lottery
  1. Tell everybody and their neighbor about your winnings. ...
  2. Opt for the up-front cash rather than the extended payout. ...
  3. Suddenly become a high roller living the high life. ...
  4. Give away the whole thing to a charity. ...
  5. Buy everything for everybody – including yourself.

What to buy first after winning the lottery? ›

Use between 10% (and) 30% of your winnings to buy a back-to-back life annuity and life insurance policy. This way, no matter what happens, you have income for life and you leave something behind.” He also said lottery winners should make an estate plan if they don't have one and also redo existing wills.

Why do lottery winners put money in a trust? ›

The best protection for your winnings is a living trust. Not only are trusts a great way to secure your winnings over time, but they can also help avoid the cost and time of probate for your family and beneficiaries.

Are lottery winners giving away money? ›

It's a scam. Say you're scrolling through your social media feed and you see a post saying, “I'm the winner of $600 million from the Powerball lottery. I'm giving away $50,000 to the first one thousand people to message me.” Would you answer?

What is the best legal entity for lottery winners? ›

Preserve your lottery winnings with the help of a lottery trust. Before claiming your winnings, you can set up a trust to protect your privacy, assets, and beneficiaries. Talk to an estate planning attorney licensed in your state as soon as possible.

What would happen if you win the lottery? ›

By default, all Powerball, Mega Millions and SuperLotto Plus jackpots are paid in 30 graduated installments. A winner is given the opportunity to choose the cash value of their jackpot prize within 60 days following their approved claim.

How to answer dv lottery interview questions? ›

It is important to answer all of the DV Lottery interview questions honestly and if you do not know the answer to a question, simply tell the consular official that you do not know.

How to give money to family after winning the lottery? ›

Consult with a Tax Professional: Before you start doling out cash, get in touch with someone who can guide you through the tax implications. Set Up Trusts: For larger gifts, consider setting up trusts. It's like giving your money a blueprint for how you want it to be used and can provide some tax benefits.

What gives you a better chance of winning the lottery? ›

To better your chances of winning any lottery, you have to buy more tickets, he said. The more tickets, the more chances of choosing the right combination of numbers.

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