When I heard that someone in my hometown of Richmond won $314 million in a recent Powerball drawing, it made me want to offer some unsolicited advice to our new multi-millionaires. Unfortunately for many lottery winners (and others who come into major
wealth), they end up playing the same sad songs.
After having a few lottery winners as clients, I’ve noticed many similarities in their experiences. It starts out great. One’s wildest dreams can be funded and realized. When one client had his winning ticket read, the lottery computer at his local convenience store played, “You’re in the Money.” Both husband and wife were retired janitors, barely making ends meet. The $20 million-plus jackpot they won made them the wealthiest family in town. They were completely unprepared to manage this new fortune.
We are family
The first big challenge comes from the winners’ family. Every sibling, child, grandchild and third cousin has “high hopes” of receiving their fair share.
It is almost a certainty that within a few years, someone in the family will feel mistreated by not getting enough, and will cut off communication with the winners. Other deadbeat relatives (usually a son or son in law), will make a very convincing case for the winners to invest in a new business idea. Contrary to the rosy projections, these businesses virtually always end up bankrupt within a few years. A good portion of the winnings are always lost/spent on family members.
It’s not just the greedy kids who are looking for a handout from our winners. The local church usually wants the almighty to be properly honored for making this windfall possible. A few alms to the church get you a nice mention in the Sunday bulletin and a little closer to salvation.
Other local charities will follow suit and consider our winners to be VIPs. Invitations to golf scrambles and black tie balls will flood in. When you’re worth millions and getting a lot of local attention, it’s hard to say no.
Live and let die
Since the lottery will disclose a winner’s name and hometown, thousands of strangers will send letters explaining their hard luck stories. Heart-wrenching tales of terminal illnesses, lost loved ones, and financial hardships will depress our winners to the depths of despair. Although easier to resist than family and local charities, these letters often take an emotional toll on our winners. At some point, most winners stop reading these letters and direct their local post office to stop delivering letters that aren’t properly postmarked.
Better get a lawyer
Most people are told by someone that after winning the lottery, you shouldn’t do anything until you get a lawyer. Since most winners don’t already have a lawyer (divorce lawyers don’t count), they are usually referred to a friend’s son who is a lawyer. This friend’s son usually tells the winner that he needs a financial advisor. Since most winners don’t already have a financial advisor, they are usually referred to a friend of the lawyer. This is why most lottery winners are usually referred to the friend of a friend’s son to be their financial
advisor, also known as an insurance salesman. After millions of dollars are invested in insurance products, the lottery winner wonders what happened to his windfall. And the beat goes on.
Money to burn
Almost every lottery winner experiences some spending fetish. Some are attracted to houses. Others buy cars, RVs, or vacations. When added to the family gifts, charitable contributions and bad investments, this lavish spending usually makes for an album full of disaster.
When it’s all said and done, some lottery winners end up with disgruntled family members, bad investments, and little if any cash. What started as the greatest thing that’s ever happened causes nothing but regret. Their life is like a country song where they lose their house, wife, car, and money. It only costs a dollar to play that Powerball again. Long shots do occasionally come in.
Maddox is a former Indiana Securities Commissioner and an investor attorney with the Fishers firm of Maddox Hargett & Caruso P.C. Views expressed here are the writer’s.