Between the moment a lottery jackpot winner gets that fortuitous call and the moment the money reaches the winner’s back account, one thing seems to happen reliably. The overnight millionaire has blown more than half of their windfall, mentally.
That’s exactly the type of flight financial experts advise against boarding. Using the recent winner of a $37 million jackpot as an example, experts from Desjardins Group’s Specialized Financial Services recommend the lucky winners remain grounded.
Keep a cool head, says Ermès De Dominicis, manager for business development under the Specialized Financial Services team with Carrefour Desjardins in Montréal. “First of all it is important not to act hastily, but instead speak with a qualified professional whose expert advice you can fully trust,” she says. “I would recommend starting by investing this amount for a short period in a safe fund. That will help you think clearly so you can prepare your next plan of action with a little perspective.”
Should the sudden itch to engage in philanthropic behaviour is felt, resist. It is not unusual for many winners to give away vast amounts to their family members and closest friends.
“In fact, if it is difficult for the winner to properly manage a large fortune, it will quite likely be just as hard for his or her children, who also suddenly become millionaires,” says De Dominicis. “Rather than writing cheques for several million each, I recommend opening a personal trust for beneficiaries — one that includes a regular payout or one lump-sum payout.”
Also, tax implications of their financial decisions must be borne in mind. A financial expert can help draw up an organized plan where the impact of each step will have already been calculated. That paves the way for good financial advice and for the winner’s fortunes to grow in the long term.
“For someone who has only a basic understanding of tax matters, financial and insurance products, it’s not easy to know what to do first after becoming a multi-millionaire,” she says. “This is why I once again recommend that they consult with experts in specialized financial services.”
(08/27/10)