How I Will Handle My Lottery Winnings

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I’m a sucker for playing the lottery when the jackpot is over $1 billion. Even then, I just buy one ticket.

I admit to fantasizing about what I would do if I won.

First, I mentally prepare by assembling my team of trusted advisors.

Here’s my process.

Avoiding fraud

When huge sums of money are involved, the scams will be more sophisticated, fooling even those who should know better.

According to an article in The New York Times, attorney Jason M. Kurland developed a national reputation for helping lottery winners with their investments. He was known at the “lottery lawyer” and was even featured on the Today Show, discussing lottery winners.

In August 2020, Kurland was arrested and accused of working with an alleged mob associate “to steal millions of dollars from his clients.” Losses exceeded more than $80 million.

Kurland was a partner in a prominent Long Island law firm, Rivkin Radler.

On July 27, 2022 Kurland was convicted of fraud and money lawyering. He faces up to 20 years in prison.

Kurland never would have been part of my investing team. Lawyers have little expertise in investing. They are trained in the law.

Select a trust and estates lawyer

I had real world experience recently in recommending a law firm to handle the estate planning needs of a billionaire. I didn’t find the assignment particularly challenging. There are a small number of national law firms that specialize in trusts and estates. It’s not difficult to find them.

If I won the lottery, I would choose one of those firms and limit their activities to drafting estate planning documents.

Having a major, national law firm is a good first step, but I would still need to assemble other critical members of the team.

Select an accounting firm

My next initiative would be to select an accounting firm. I would follow the same protocol and look for a major, national firm. Again, there are lists of those firms. Selecting one of the top 10 would be a good choice.

There are many honest, competent smaller firms. Why do I limit my choices to the largest ones?

When huge sums of money are at issue, I need the infrastructure only these firms can provide. I would be comforted by the fact that they have policies and practices to avoid fraud by their partners. In the event a partner (like Kurland) went “rogue”, I would be confident the firm could respond in damages from its malpractice insurance and independent assets.

Select the financial advisor

I have an advantage when it comes to selecting a financial advisor. I understand investing and am privileged to count many wonderful advisors as clients. I have no doubt about their integrity or professionalism.

But I wouldn’t retain them to manage my new-found wealth.

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I have to think differently about this task. I’m not going to be around forever. My heirs don’t have my sophistication. They are going to need an institution to provide continuous, inter-generational guidance, which presents a troubling issue.

Most of the large institutional money managers espouse active management. Some sell high-commission or high-expense products. I’ve spent most of my adult life as an advocate for “evidence-based” investing. I wouldn’t want my lottery winnings invested in any other manner.

There’s another issue I would need to confront. With such a large portfolio, constructing a sophisticated bond ladder would be an important component of my investments. Few advisory firms have the sophistication to do this in-house.

I would explore these options:

1. There are some large banks, like Northern Trust, which are experienced in creating bond ladders and invest using index funds, ETFs and passively managed funds. These firms would be high on my list.

2. There are a few large accounting firms with a wealth management division, where the advisors follow sound academic investing principles. There’s an appeal to having both accounting and wealth management with one firm, but the combined firm would have to be large enough to meet my other concerns.

3. There are some large advisory firms that are evidence-based, with expertise in structuring laddered bond portfolios. I like having the checks and balances of an advisory firm and a separate accounting firm reviewing their reports.

4. I have such a high level of trust and confidence in my advisory firm clients that I would consider hiring one of them and limit their role to retaining and supervising the advisory firm described in nos. 1-3 above. We could negotiate flat-fee compensation for their initial and ongoing services. This option is appealing because it would give me and my heirs another level of protection.

Most lottery winners aren’t sophisticated about investing. They could use this “supervisory” advisor to help them avoid the massive financial mistakes made by many winners.

I often read articles telling winners what they should do if they win the lottery. I don’t agree with much of this advice. My protocol would provide greater protection, higher expected returns and a far better long-term outcome.

Dan trains executives and employees in the lessons based on the research on his latest book, Ask: How to Relate to Anyone. His online course, Ask: Increase Your Sales. Deepen Your Relationships, is currently available.