Here’s a snippet of advice from an article about the lottery curse...
So let's say you or someone you know wins the lottery. How can you avoid the curse of the lottery? It's easy. Just do nothing. Don't tell anyone. Not even your parents. Not even your best friend. Sit and wait and do not declare yourself the winner until you do a few things.
Hire an attorney immediately
Hire a lawyer from a large, national firm. Make sure you are assigned to a partner who has been with the firm for a long time. Don't use your local or regular attorney. Use someone who has ZERO ties to your life, your family, and your friends. Get an attorney that specializes in Trusts and Estates from one of the 50 biggest law firms in the U.S.
Take the lump sum
You can make much better decisions with the lump sum that will end up paying out more annually than the state's annuity will. If you take the annuity you won't have access to the majority of your cash and the annual rate of return will barely beat inflation. You can do much better investing it in a standard fund. In general, you should expect to get about half of the original jackpot if you elect a lump sum. After that, you should expect to pay around 33% to state and federal taxes. Jack Whittaker's jackpot was $315 million. He took the lump-sum cash up-front option, which knocked off $145 million (46% of the total) leaving him with $170 million. That was then subject to withholding for taxes of $56 million (33%) leaving him with $114 million.
Decide how much money you are going to give to family and friends
Generally, giving 20% or so of your after tax lump sum winnings to family and friends is being incredibly generous. Tell your lawyer this is what you want to do. 20% of $114 million is $22.8 million. That leaves you with $91.2 million. Do not ask your family what they want. Do not buy them a house. Do not give your family and friends cash. Tell your attorney to set up a series of trusts for your family that equal 20% of your after tax winnings. If you start to hand out cash out of generosity, that will come back to bite you in the butt. Setting up a trust or a managed fund for your family that is in the double digit millions is very generous.
Don't hire an investment manager
Investment managers charge fees, usually a percentage of assets. If they charge 1% (which is low) they have to beat the market by 1% every year just to break even with a general market index fund. You don't need the extra return or the extra risk. Go for the index fund instead if you must invest in stocks. This is a hard rule to follow. They will come recommended by friends and family. They will be your second cousin on your mother's side. Investment managers will sound smart. You do not need them.
Invest in long term U.S. Treasury Bonds
Use somewhere between 20% and 33% of your remaining $91.2 winnings to purchase a combination of longer term U.S. treasuries (5 or 10 year) This is your safety net. You will be protected from yourself. It will be tempting to become a big investor right away because "Even if I lose it all I still have $XX million left! Anyone could live on that comfortably for the rest of their life." That's not going to happen. Right now, you'll get around 3.5% on the 10 year U.S. treasury. With $18.2 million (20% of $91.2 mil after your generous family gift) invested in longer term U.S. treasury bonds you will get a return of $638,400 per year. If everything else blows up, you still have that, and you will be in the top 1% of income in the United States. Don't take the chance.
What to do with the rest
Now you have $72.9 million left. Be safe, put about half of this, or $36.4 million into an S&P 500 index fund that has low fees. Continue to resist the lure of investors. Don't. Remember that even if you lose every other dime, you have $638,400 per year you didn't have before that will keep coming in. You should return around 7.00% or so over the next 10 years. You should expect to touch not even a dime of this money for 10 or 15 or even 20 years. In 20 years $36.4 million could easily become $115 million.
What to do with the remaining $36.4 million in cash
You've provided for your family generously and you know you'll be getting $638,400 a year in salary because you made some wise, safe, investing choices. Go ahead and have fun with that remaining $36.4 million. Buy a house or three, a private jet, a super yacht. Become an angel investor and fund some startups – just not for anyone you know. Play the market with it. Enjoy it. But still do not give cash to friends and family and do not read mail from anyone you do not know. The sob stories will break your heart. Save yourself the anguish.
