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How to not lose a lottery jackpot

You won a jackpot. Here's how to not lose it.

Coins, a calculator and papers on a desk.
Alex Cramer

Taking home a massive jackpot is every lottery player's dream. But while winning your fortune is as simple as picking the correct series of numbers, keeping it is a much greater challenge because, as the Notorious BIG once said, “Mo' money, mo' problems.”

Stories of lottery winners losing their entire fortunes are so numerous you could write a book about them. That's why we're presenting this guide on how to keep your fortune after you win it.

The taxman

The first thing you'll want to do after winning a multi-million jackpot is scream, drink champagne, and maybe call a luxury car dealer.

The first thing you should do is pay your taxes. Winning a large jackpot will likely push you into the top federal tax bracket, which is 37%. So if you win a $100 million jackpot, you'll actually take home $63 million after paying the IRS.

However, you'll also have to consider state taxes, which can vary wildly depending on where you live or win your fortune. For example, states such as California, Texas, Washington, and Wyoming don't charge any tax on lottery winnings.

On the other hand, your lottery winnings in Michigan will be subject to the state income tax, which is currently 4.25%.

Lottery winnings are taxed as they are received. So, if you opt for the lump sum payout, you'll pay taxes on your entire prize immediately. But if you take the annuity option, you'll be taxed on each payment as you receive it.

Manage your money

You win a lottery jackpot on your own. You keep it by surrounding yourself with the right people.

Unless you have experience managing a significant amount of wealth, you'll need to work with financial professionals who do. This will typically mean hiring some combination of a financial planner, accountant, lawyer, and money manager.

Before you trust anyone with your fortune, you should check with regulatory agencies such as FINRA or the CFP Board to ensure the advisors you work with are certified, credible, and not subject to any legal actions or complaints.

Even if you don't want to deal with the complications of managing your millions, a massive jackpot isn't something you can just park in your bank account.

The federal government only insures bank accounts for up to $250,000. That means if your bank fails, you'll lose your entire fortune except for a quarter million dollars.

Appreciate your assets

Most of the things you buy can be classified as either appreciating or depreciating assets. In simple terms, this means that the things you own become either more or less valuable.

For the long-term health of your wealth, you'll want to invest in things that appreciate or gain value over time. That generally means stocks, real estate, and rare items such as fine art.

While many people have criticized billion-dollar Powerball winner Edwin Castro for buying multiple high-priced Los Angeles homes, those properties will most likely increase in value, making them investments rather than expenses.

You'll also want to be mindful of not spending too much money on depreciating assets or things that lose value. Cars, clothes, and jewelry are all worth less money the moment you buy them.

So, while you may want to build a massive car collection after your win, keep in mind that each one of those vehicles loses 20% of its value the second you take them off the dealer's lot.

No is a complete sentence

Every lottery winner tells the same story: the moment the people around them learn of their new wealth, everyone from close friends to people they haven't seen in twenty years starts asking them for money. In fact, many lottery winners have gone broke because they didn't know how to say no to people constantly hitting them up for cash.

Develop a strategy for telling people that you can't give away your fortune. That may mean damaging relationships with people you care about, but you are the only person entitled to your wealth.

Remember, you don't have to tell anyone that you're rich. Sixteen states, including New Jersey, Texas, Virginia, Arizona, and Minnesota, will let you stay anonymous when collecting your jackpot.

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