Massive lottery winnings require careful management, expert says
Winning a lotto jackpot can be liberating, but experts advise winners to develop a thoughtful gifting strategy, proceed with caution and plan for the future
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When Hao Ping Chung of Richmond saw $58 million in his playnow.com account and learned he had won the Gold Ball jackpot for the Lotto 6/49 on March 6, he didn’t believe it.
Shock, disbelief and the descent into a kind of brain fog are common for lottery winners, said Stephan Desbiens, a portfolio manager at Exponent Investment Management.
Although Desbiens isn’t working with Chung, he counts a few jackpot winners among his clients.
“Every Tuesday, Wednesday, Friday, Saturday new millionaires are minted through lotteries in Canada,” said Desbiens.
While there are spectacular positives that come with a financial windfall, Desbiens said the shock can be as seismic, although not as sorrowful, as unexpectedly losing a loved one.
“Your world is completely changed,” he said.
The shock can prevent a lottery winner from absorbing really important information. For that reason, his first job is to help a client stay calm and slow down.
“Nothing needs to happen right away,” said Desbiens. “If you are careful and follow good advice it’s liberating. You can become independent. If you win enough, you can choose to not work, to help friends and family, help others and donate to causes you care about.”
Most lottery winners he has worked with are very generous. That’s part of the pleasure of winning.
He’s also seen lottery winners that have been too generous, something that can happen when proper planning isn’t in place.
One of Desbiens’ clients promised $1 million to the child who was driving him to pick up his cheque.
In that moment of heightened excitement, he didn’t consider that he had four other children who would want the same amount of money, not all of whom were equipped to handle a large amount of cash.
He also had brothers and sisters he wanted to help out — and he also needed to secure his own future. He was suddenly in a very fraught situation.
He told his child he would have to reconsider the $1 million gift.
“Once the promise was made, that didn’t go very well,” said Desbiens.
He recommends not telling anyone about the windfall until you get a team in place including an accountant, a financial planner and a lawyer, and to make a plan that includes a gifting strategy.
If you’ve won a huge jackpot, you probably need to change your contact information: Suddenly you’re a celebrity. In B.C., jackpot winners are required to have names, photographs and place of residence made public.
“Friends you haven’t seen in years come out of the woodwork,” said Desbiens.
News stories about lottery winners whose lives have spiralled out of control frequently make headlines: tales of emotionally damaged families like the Laviguers in Quebec, murder, death by lifestyle excesses or bankruptcy.
“Not everyone wins $50 (million) or $100 million,” said Desbiens. “You can win $500,000 or $1 million and end up bankrupt.”
It might be more realistic to develop a plan to retire early, rather than quit a job or start funding projects for friends.
Initial choices are easy: “You can clear up your debt, pay your mortgage, help your family,” said Desbiens.
“Money can really change relationships. People will tell me that wouldn’t happen in my family, my family is too close,” said Desbiens, but he cautions that when people “feel like they’ve been jilted,” they will behave in uncharacteristic ways.
Careful planning and thoughtful communication are key.
Desbiens also recommends retaining touchstones and supports that are meaningful.
“It can be lonely. If you are from a nice neighbourhood, with a lot of friends, don’t move to Shaughnessy. Stay where you are.”
And, of course, remember to enjoy your winnings.
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