What to do when you win a large sum of money

You played the lottery, and you won! Congratulations! Youre bursting with excitement, but you also have a million questions swirling around in your head about what to do next. That

What to do when you win a large sum of money

You played the lottery, and you won! Congratulations! Youre bursting with excitement, but you also have a million questions swirling around in your head about what to do next. Thats okay. All you need to do is take a deep breath and follow these steps.

5 steps to do before and after you claim your lottery prize

When people come into a small fortune, theyre often overwhelmed by the attention theyre likely to draw and the long-lost friends who tend to come out of the woodwork. You can save yourself a heap of hassles and headaches by following these steps.

Sign your ticket.

Immediately sign the back of your lottery ticket and hide it somewhere safe. It doesnt officially belong to you until youve given it your autograph.

Dont tell anyone outside of your partner.

Although you may feel like telling everyone about your tremendous luck, this is precisely the time when you dont want to be the center of attention. If you live in a state where lottery organizers are required to announce the names of the winners, get off social media right away and think about leaving town for a while. By deactivating your social media accounts, youll avoid unsolicited messages and keep prying eyes from perusing your old photos. And by taking a trip out of town, you can evade any scrutiny while building a team to help you manage your money.

Assemble a team of professionals.

Its incredibly important to hire professional help to keep you from making unwise decisions. Youll want to speak to attorneys who specialize in trusts, estates, and financial windfalls, but dont simply contact your local lawyer. Instead, research reputable attorneys using resources like Martindale or US News and World Reports list of best law firms. Take your time vetting your attorney. Later on, youll want them to sit in with you when you hire a financial adviser and an accountant. Your attorney will also help you create a trust  an entity that lets you claim your windfall without revealing your name.

Claim your lottery money.

You typically have 180 to 365 days to claim lottery winnings and decide whether to take one lump sum or an annuity. Carefully consider whether youd like to have your winning delivered to you all at once, or if youd rather receive a steady stream of income over the course of several years or decades.

Move the money into your accounts.

Work with your financial adviser to get your funds into your trust or bank account before you start spending it. If you won more than $250,000, consider spreading your money out across multiple accounts because the FDIC only insures up to $250,000 per owner per bank unless you open a special type of account, like a trust. If you need to get your money back into a bank account internationally or send money to family overseas, compare international money transfer services that are best equipped to help you with a large transfer.

Carefully plan for your financial future.

After youve collected your windfall and paid taxes on it, you can lay the foundation for a solid financial future. There are many things you can do with your money, so review all your options to create a financial plan.

10 states that allow lottery winners to remain anonymous

These states allow lottery winners to remain anonymous  although some only let you protect your identity if youve won more than a certain dollar amount.Arizona (only lasts for 90 days)$600Delaware$0Georgia$250,000Kansas$0Maryland$0North Dakota$0Ohio$0South Carolina$0Texas$0Virginia$10 million

Pros and cons of lump sums and annuities

If you have the option to choose between a lump sum and an annuity, carefully weigh these pros and cons before making a decision.

Lump sum

A lump sum is when you receive all your earnings in one payment.


  • Receive all the money at once. With a lump sum, you have full control over your winnings.
  • Easier to tackle large goals. If you aim to pay off large amounts of debt, make a big investment or buy a home, it may be easier to accomplish with a lump sum.
  • Guaranteed tax rate. Youre guaranteed to pay taxes at the current years rate, not a potentially higher rate as with annuities.


  • Easy to squander. Youre more likely to blow your winnings on extravagant purchases when you receive it all upfront.
  • Dont receive the advertised amount. Advertised winnings are typically based on annuity payments, so you wont take home as much if you choose the lump sum.
  • No guaranteed income stream. Its up to you to make sure your winnings last for years to come.


An annuity is when your winnings are broken up into smaller payments over a 30-year period.


  • Guaranteed income stream. With an annuity, youre guaranteed to have money coming in every month.
  • Receive the advertised amount. Winners who choose an annuity receive the advertised jackpot.
  • Protection. Family members, friends and strangers are less likely to ask for handouts when you receive fixed payments.


  • Not as flexible. Smaller payments mean you dont have the same flexibility to spend, invest, give and pay off debt.
  • Potentially higher taxes. Each annuity payment is taxed at the current years rate, so you may pay more in taxes if rates increase.
  • Uncertainty. If something happens to you within the 30 year period, youll miss out on all your earnings.

Rather than spending your new fortune on frivolous purchases, think about these smart moves you could make with your winnings.

1. Consider a savings account for your lottery winnings

You may want to consider opening an account to spread out your money or simply to earn a higher interest rate. Here are some options to help you earn interest on your winnings.

Aspiration Spend & Save Account

American Express® High Yield Savings

2. Pay off debts

The longer you hold onto debt, the more interest youll accrue over the long run. Now is the perfect time to pay off everything you owe: credit cards, student loans, mortgages and more. Its a responsible first step that will save you money over time.

3. Put money into a rainy-day fund

You might be surprised by how many lottery winners end up broke. Whether through poor spending habits or plain bad luck, its easy to squander a large windfall. So plan accordingly and create a backup fund.

A rainy-day fund is typically stocked with six months worth of your salary. Since youve just received a large sum of money, you may instead want to put a percentage of the windfall into an emergency fund. To find the right amount to save, speak with your financial adviser.

4. Consider waiting awhile before doing anything else

Once youve accepted the money, paid off your debts and created an emergency fund, consider doing absolutely nothing. Your winnings arent going anywhere.

Many financial advisers recommend letting the excitement die down before taking any other actions.

For several months or even a year, consider living as you normally do. This will give you time to carefully plan out your next steps.

For example, work with your financial adviser to determine how much of your windfall youll give to family and friends. You may even consider hiring a psychologist to help you deal with the emotions that come with receiving a large sum of money.

5. Create an investment strategy

Work with your financial adviser to assemble an investment strategy. This strategy should be consistent with your tolerance for risk.

To get your feet wet, you might first look at investments like short-term corporate bonds, US Treasury securities and short-term municipal bonds. These are considered relatively safe investments. Depending on the size of your windfall, you may generate a sizable income off of these boring investments alone.

After consulting with your financial adviser, you could expand your investment portfolio to include investments like stocks. Your financial adviser can help you create a portfolio with the right mix of stocks, bonds and other securities.

6. Start planning your estate

If all goes well, youll live the rest of your life without having to worry about money.

Youll want your children and relatives to enjoy the same comfort, so begin the process of estate planning. In short, this means youll decide what happens to your assets when you pass away.

Work with your financial adviser, an estate planning attorney and a tax adviser to settle matters of your estate  preferably well in advance.

What happens to my lottery annuity if I die?

You can either leave future annuity payments to a single beneficiary or to your estate.

Do you get a check when you win the lottery?

Most lottery winnings are electronically deposited into your account, so theres a good chance you wont receive a check.

Do you pay taxes on lottery winnings every year?

You pay income taxes on earnings in the year theyre received. So, if you take a lump sum, youll pay taxes once. If you take an annuity, youll pay taxes for 30 years.

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