Reddit History: /u/BlakeClass's comment on What to do if you win The Lottery

reddit_lottery.txt

Congratulations! You just won millions of dollars in the lottery! That's great.

Now you're fucked.

No really.

You are.

You're fucked.

If you just want to skip the biographical tales of woe of some of the math-tax protagonists, 
skip on down to the next comment. To see what to do in the event you win the lottery.

You see, it's something of an open secret that winners of obnoxiously large jackpots tend to 
end up badly with alarming regularity. Not the $1 million dollar winners. But anyone in the 
nine-figure range is at high risk. Eight-figures? Pretty likely to be screwed. Seven-figures? 
Yep. Painful. Perhaps this is a consequence of the sample. The demographics of lottery players 
might be exactly the wrong people to win large sums of money. Or perhaps money is the root of 
all evil. Either way, you are going to have to be careful. Don't believe me? Consider this:

Large jackpot winners face double-digit multiples of probability versus the general 
population to be the victim of:

  * Homicide (something like 20x more likely)
  * Drug overdose
  * Bankruptcy (how's that for irony?)
  * Kidnapping

And triple-digit multiples of probability versus the general population 
rate to be:

  * Convicted of drunk driving
  * The victim of Homicide (at the hands of a family member) 120x more 
  likely in this case, ain't love grand?
  * A defendant in a civil lawsuit
  * A defendant in felony criminal proceedings

Believe it or not, your biggest enemy if you suddenly become possessed 
of large sums of money is...you. At least you will have the consolation 
of meeting your fate by your own hand. But if you can't manage it on
your own, don't worry. There are any number of willing participants 
ready to help you start your vicious downward spiral for you. Mind you, 
many of these will be "friends," "friendly neighbors," or "family." 

Often, they won't even have evil intentions. But, as I'm sure you know,
that makes little difference in the end. Most aren't evil. Most aren't 
malicious. Some are. None are good for you.

Jack Whittaker, a Johnny Cash attired, West Virginia native, is the 
poster boy for the dangers of a lump sum award. In 2002 Mr. Whittaker 
(55 years old at the time) won what was, also at the time, the largest 
single award jackpot in U.S. history. $315 million. At the time, he 
planned to live as if nothing had changed, or so he said. He was 
remarkably modest and decent before the jackpot, and his ship sure 
came in, right? 

Wrong.

Mr. Whittaker became the subject of a number of personal challenges, 
escalating into personal tragedies, complicated by a number of legal 
troubles.

Whittaker wasn't a typical lottery winner either. His net worth at the 
time of his winnings was in excess of $15 million, owing to his 
ownership of a successful contracting firm in West Virginia. His claim 
to want to live "as if nothing had changed" actually seemed plausible. 
He should have been well equipped for wealth. He was already quite 
wealthy, after all. By all accounts he was somewhat modest, low profile, 
generous and good-natured. He should have coasted off into the sunset. 

Yeah.

Not exactly.

Whittaker took the all-cash option, $170 million, instead of the annuity 
option, and took possession of $114 million in cash after $56 million in 
taxes. After that, things went south.

Whittaker quickly became the subject of a number of financial stalkers, 
who would lurk at his regular breakfast hideout and accost him with
suggestions for how to spend his money. They were unemployed. No, an 
interview tomorrow morning wasn't good enough. They needed cash NOW. 
Perhaps they had a sure-fire business plan. Their daughter had cancer. A 
niece needed dialysis. Needless to say, Whittaker stopped going to his 
breakfast haunt. Eventually, they began ringing his doorbell. Sometimes 
in the early morning. Before long he was paying off-duty deputies to 
protect his family. He was accused of being heartless. Cold. Stingy.

Letters poured in. Children with cancer. Diabetes. MS. You name it. He 
hired three people to sort the mail. A detective to filter out the false 
claims and the con men (and women) was retained.

Brenda, the clerk who had sold Whittaker the ticket, was a victim of collateral 
damage. Whittaker had written her a check for $44,000 and bought her house, 
but she was by no means a millionaire. Rumors that the state routinely paid 
the clerk who had sold the ticket 10% of the jackpot winnings hounded her. 
She was followed home from work. Threatened. Assaulted.

Whittaker's car was twice broken into, by trusted acquaintances who watched 
him leave large amounts of cash in it. $500,000 and $200,000 were stolen in 
two separate instances. The thieves spiked Whittaker's drink with prescription 
drugs in the first instance. The second incident was the handiwork of his 
granddaughter's friends, who had been probing the girl for details on 
Whittaker's cash for weeks.

Even Whittaker's good-faith generosity was questioned. When he offered $10,000 
to improve the city's water park so that it was more handicap accessible, 
locals complained that he spent more money at the strip club (amusingly this 
was true).

Whittaker invested quite a bit in his own businesses, tripled the number of 
people his businesses employed (making him one of the larger employers in the 
area), and eventually had given away $14 million to charity through a foundation 
he set up for the purpose. This is, of course, what you are "supposed" to do. 
Set up a foundation. Be careful about your charitable giving. It made no 
difference in the end.

To top it all off, Whittaker had been accused of ruining a number of marriages. 
His money made other men look inferior, they said, wherever he went in the small 
West Virginia town he called home. Resentment grew quickly. And festered. 
Whittaker paid four settlements related to this sort of claim. Yes, you read 
that right. Four.

His family and their immediate circle were quickly the victims of odds-defying 
numbers of overdoses, emergency room visits, and even fatalities. His 
granddaughter, the eighteen-year-old "Brandi" (who Whittaker had been giving 
a $2100.00 per week allowance) was found dead after having been missing for 
several weeks. Her death was, apparently, from a drug overdose, but Whittaker 
suspected foul play. Her body had been wrapped in a tarp and hidden behind a 
rusted-out van. Her seventeen-year-old boyfriend had expired three months earlier 
in Whittaker's vacation house, also from an overdose. Some of his friends had
robbed the house after his overdose, stepping over his body to make their escape 
and then returning for more before stepping over his body again to leave. His 
parents sued for wrongful death claiming that Whittaker's loose purse strings 
contributed to their son's death. Amazingly, juries are prone to award damages 
in cases such as these. Whittaker settled. Again.

Even before the deaths, the local and state police had taken a special interest
in Whittaker after his new-found fame. He was arrested for minor and less minor
offenses many times after his winnings, despite having had a nearly spotless 
record before the award. Whittaker's high profile couldn't have helped him much 
in this regard.

In 18 months Whittaker had been cited for over 250 violations ranging from broken 
tail lights on every one of his five new cars to the improper display of renewal 
stickers. A lawsuit charging various police organizations with harassment went 
nowhere and Whittaker was hit with court costs instead.

Whittaker's wife filed for divorce, and in the process froze a number of his 
assets and the accounts of his operating companies. Caesars in Atlantic City 
sued him for $1.5 million to cover bounced checks, caused by the asset freeze.

Today Whittaker is badly in debt, and bankruptcy looms large in his future.

But, hey, that's just one example, right?

Wrong.

Nearly one-third of multi-million dollar jackpot winners eventually declare 
bankruptcy. Some end up worse. To give you just a taste of the possibilities, 
consider the fates of:

  * Billie Bob Harrell, Jr.: $31 million. Texas, 1997. As of 1999: Committed
  suicide in the wake of incessant requests for money from friends and family. 
  “Winning the lottery is the worst thing that ever happened to me.
  
  * William âBud❠Post: $16.2 million. Pennsylvania. 1988. In 1989: Brother 
  hires a contract murderer to kill him and his sixth wife. Landlady sued for a 
  portion of the jackpot. Convicted of assault for firing a gun at a debt collector. 
  Declared bankruptcy. Dead in 2006.

  * Evelyn Adams: $5.4 million (won TWICE 1985, 1986). As of 2001: Poor and living 
  in a trailer gave away and gambled most of her fortune.

  * Suzanne Mullins: $4.2 million. Virginia. 1993. As of 2004: No assets left.

  * Shefik Tallmadge: $6.7 million. Arizona. 1988. As of 2005: Declared bankruptcy.
  
  * Thomas Strong: $3 million. Texas. 1993. As of 2006: Died in a shoot-out with police.
  
  * Victoria Zell: $11 million. 2001. Minnesota. As of 2006: Broke. Serving a
  seven-year sentence for vehicular manslaughter.
  
  * Karen Cohen: $1 million. Illinois. 1984. As of 2000: Filed for bankruptcy. As of 
  2006: Sentenced to 22 months for lying to the federal bankruptcy court.
  
  * Jeffrey Dampier: $20 million. Illinois. 1996. As of 2006: Kidnapped and murdered 
  by own sister-in-law.
  
  * Ed Gildein: $8.8 million. Texas. 1993. As of 2003: Dead. His wife saddled with 
  his debts. As of 2005: His wife was being sued by her own daughter who claimed 
  that she was taking money from a trust fund and squandering cash in Las Vegas.
  
  * Willie Hurt: $3.1 million. Michigan. 1989. As of 1991: Addicted to cocaine. 
  Divorced. Broke. Indicted for murder.
  
  * Michael Klingebiel: $2 million. As of 1998 sued by his own mother claiming he 
  failed to share the jackpot with her.
  
  * Janite Lee: $18 million. 1993. Missouri. As of 2001: Filed for bankruptcy 
  with $700 in assets.

So, what the hell DO you do if you are unlucky enough to win the lottery?

This is the absolute most important thing you can do right away: NOTHING.

Yes. Nothing.

DO NOT DECLARE YOURSELF THE WINNER yet.

Do NOT tell anyone. The urge is going to be nearly irresistible. 

Resist it. 

Trust me.

1. IMMEDIATELY retain an attorney.

    Get a partner from a larger, NATIONAL firm. Don't let them pawn off junior 
    partners or associates on you. They might try, all law firms might but 
    insist instead that your lead be a partner who has been with the firm for a 
    while. Do NOT use your local attorney. Yes, I mean your long-standing family 
    attorney who did your mother's will. Do not use the guy who fought your 
    dry-cleaner bill. Do not use the guy you have trusted your entire life because
    of his long and faithful service to your family. In fact, do not use any firm
    that has any connection to family or friends, or community.
    
    TRUST me. 
    
    This is bad. 
    
    You want someone who has never heard of you, any of your friends, or any
    member of your family. Go to the closest big city and walk into one of the 
    national firms asking for one of the "Trust and Estates" partners you have 
    previously looked up on http://www.martindale.com from one of the largest 
    50 firms in the United States which have an office near you. You can look 
    up attornies by practice area and firm on Martindale.

2. Decide to take the lump sum.

    Most lotteries pay a really pathetic rate for the annuity. It usually
    hovers around 4.5% annual return or less, depending. It doesn't take much 
    to do better than this, and if you have the money already in cash, rather
    than leaving it in the hands of the state, you can pull from the capital 
    whenever you like. If you take the annuity you won't have access to that 
    cash. That could be good. It could be bad. It's probably bad unless you 
    have a very addictive personality. If you need an allowance managed by 
    the state, it is because you didn't listen to point #1 above.

    Why not let the state just handle it for you and give you your allowance?

    Many state lotteries pay you your "allowance" (the annuity option) by buying 
    U.S. treasury instruments and running the interest payments through their 
    bureaucracy before sending it to you along with a hunk of the principal 
    every month. You will not be beating inflation by much, if at all. There is 
    no reason you couldn't do this yourself if a low single-digit return is 
    acceptable to you.

    You aren't going to get even remotely the amount of the actual jackpot. Take 
    our old friend Mr. Whittaker. Using Whittaker is a good model both because of 
    the reminder of his ignominious decline, and the fact that his winning ticket
    was one of the larger ones on record. If his situation looks less than stellar
    to you, you might have a better perspective on how "large" your winnings 
    aren't. Whittaker's "jackpot" was $315 million. He selected the lump-sum cash 
    up-front option, which knocked off $145 million (or 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.

    In general, you should expect to get about half of the original jackpot if 
    you elect a lump sum (maybe better, it depends). After that, you should expect
    to lose around 33% of your already pruned figure to state and federal taxes. 
    Your mileage may vary, particularly if you live in a state with aggressive 
    taxation schemes.

3. Decide right now, how much you plan to give to family and friends.

    This really shouldn't be more than 20% or so. Figure it out right now. Pick 
    your number. Tell your lawyer. That's it. Don't change it. 20% of $114 million 
    is $22.8 million. That leaves you with $91.2 million. DO NOT CONSULT WITH FAMILY
    when deciding how much to give to family. You are going to get advice that is 
    badly tainted by conflict of interest, and if other family members find out that 
    Aunt Flo was consulted and they weren't you will never hear the end of it. 
    Neither will Aunt Flo. This might later form the basis for an allegation that
    Aunt Flo unduly influenced you and a lawsuit might magically appear on this 
    basis. No, I'm not kidding. I know of one circumstance (related to a business 
    windfall, not a lottery) where the plaintiffs WON this case.

    Do NOT give anyone cash. Ever. Period. Just don't. Do not buy them houses. Do not 
    buy them cars. Tell your attorney that you want to provide for your family and 
    that you want to set up a series of trusts for them that will total 20% of your
    after-tax winnings. Tell him you want the trust empowered to fund higher
    education, some help (not a total) purchase of their first home, some provision
    for weddings and the like, whatever. Do NOT put yourself in the position of 
    handing out cash. Once you do, if you stop, you will be accused of being a
    heartless bastard (or bitch). Trust me. It won't go well.

    It will be easy to lose perspective. It is now the duty of your friends, 
    family, relatives, hangers-on, and their inner circle to skew your perspective,
    and they take this job quite seriously. Setting up a trust, a managed fund for
    your family that is in the double-digit millions is AMAZINGLY generous. You 
    need never have trouble sleeping because you didn't lend Uncle Jerry $20,000 
    in small denomination unmarked bills to start his chain of deep-fried peanut
    butter pancake restaurants. ("Deep'n 'nutter Restaurants") Your attorney 
    will have a number of good ideas on how to parse this wealth out without
    turning your siblings/spouse/children/grandchildren/cousins/waitresses into 
    the latest Paris Hilton.

4. You will be encouraged to hire an investment manager. 

    Considerable pressure will be applied. Don't.
    
    Investment managers charge fees, usually a percentage of assets. 
    Consider this: If they charge 1% (which is low, I doubt you could
    find this deal, actually) they have to beat the market by 1% every 
    year just to break even with a general market index fund. It is 
    not worth it, and 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. They will come recommended by family. They will be your 
    second cousin on your mother's side. Investment managers will sound
    smart. They will have lots of cool acronyms. They will have nice 
    PowerPoint presentations. They might (MIGHT) pay for your shrimp 
    cocktail lunch at TGI Friday's while reminding you how poor their 
    side of the family is. They live for this stuff.

    You should smile, thank them for their time, and then tell them you 
    will get back to them next week. Don't sign ANYTHING. Don't write it
    on a cocktail napkin (lottery lawsuit cases have been won and lost
    over drunkenly scrawled cocktail napkin addition and subtraction 
    figures with lots of zeros on them). Never call them back. Trust me. 
    You will thank me later. This tactic, smiling, thanking people for 
    their time, and promising to get back to people, is going to have to
    become familiar. You will have to learn to say no gently, without 
    saying the word "no." It sounds underhanded. Sneaky. It is. And it's 
    part of your new survival strategy. I mean the word "survival" quite 
    literally.

    Get all this figured out BEFORE you claim your winnings. They aren't
    going anywhere. Just relax.

5. Paranoia 

    If you elect to be more global about your paranoia, use between 20.00% 
    and 33.00% of what you have not decided to commit to a family fund 
    IMMEDIATELY to purchase a combination of longer-term U.S. treasuries 
    (5 or 10 years are a good idea) and perhaps even another G7 treasury
    instrument. This is your safety net. You will be protected...from 
    yourself.

    You are going to be really tempted to starting being a big investor. 
    You are going to be convinced that you can double your money in Vegas 
    with your awesome Roulette system/by funding your friend's amazing idea
    to sell Lemming dung/buying land for oil drilling/by shorting the North
    Pole Ice market (global warming, you know). This all sounds tempting 
    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." Yeah, 
    except for 33% of everyone who won the lottery.

    You're not going to double your money, so cool it. Let me say that 
    again. You're not going to double your money, so cool it. Right now, 
    you'll get around 3.5% on the 10 years U.S. treasury. With $18.2 million 
    (20% of $91.2 mil after your absurdly generous family gift) invested in 
    those, you will pull down $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. So how about you not fuck with it. Eh? And that's income that is 
    damn safe. If we get to the point where the United States defaults on those 
    instruments, we are in far worse shape than worrying about money.

    If you are really paranoid, you might consider picking another G7 or otherwise 
    mainstream country other than the U.S. according to where you want to live in 
    the United States dissolves into anarchy or Britney Spears is elected to the 
    United States Senate. Put some fraction in something like Swiss Government 
    Bonds at 3%. If the Swiss stop paying on their government debt, well, then
    you know money really means nothing anywhere on the globe anymore. I'd 
    study small field sustainable agriculture if you think this is a possibility.
    You might have to start feeding yourself.

6. That leaves, say, 80% of $91.2 million or $72.9 million.
    
    Here is where things start to get less clear. Personally, I think you 
    should dump half of this, or $36.4 million, into a boring S&P 500 index fund. 
    Find something with low fees. You are going to be constantly tempted to 
    retain "sophisticated" advisers who charge "nominal fees." Don't. Period.
    Even if you lose every other dime, you have $638,400 per year you didn't 
    have before that will keep coming in until the United States falls into chaos.
    Fuck advisers and their fees. Instead, drop your $36.4 million in the market 
    in a low fee vehicle. Unless we have an unprecedented downturn the likes of 
    which the United States has never seen, 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.

7. So you have put a safety net in place.

    You have provided for your family beyond your wildest dreams. And you still
    have $36.4 million in "cash." You know you will be getting $638,400 per year
    unless the capital building is burning, you don't ever need to give anyone 
    you care about cash, since they are provided for generously and responsibly 
    (and can't blow it in Vegas) and you have a HUGE nest egg that is growing at 
    market rates. (Given the recent dip, you'll be buying in at great prices for
    the market). What now? Whatever you want. Go ahead and burn through $36.4 
    million in hookers and blow if you want. You've got more security than 99% of the 
    country. A lot of it is in Trusts so even if you are sued your family will live 
    well, and progress across generations. If your lawyer is worth his salt (I bet he
    is) then you will be insulated from most lawsuits anyhow. Buy a nice house or two,
    make sure they aren't stupid investments though. Go ahead and be an angel investor 
    and fund some startups, but REFUSE to do it for anyone you know. (Friends and money, 
    oil and water - Michael Corleone) Play. Have fun. You earned it by putting together
    the shoe sizes of your whole family on one ticket and winning the jackpot.

/u/nreshackleford adds:

I might add that if your state requires disclosure of the winner:

    1. Sign the ticket, and make multiple xerox copies. Store the ticket and the 
       copies in separate safe deposit boxes (in separate banks, jackass).
    2. Unless signed, the ticket is "bearer paper" and belongs to literally whoever
       is holding it (at least that's the language on the back of all the tickets I've 
       ever bought). You will now want to form a trust or other legal fiction.
    3. Sign the ticket over to the legal fiction (trust, LLC, whatever your fancy lawyer 
       tells you is best) by special endorsement.
    4. Have a representative of the legal fiction collect the prize money.