By Sara O'Brien —
CNBC
If you've never been asked for money by family or friends, that's likely to change if you win the $1.1 billion jackpot in the Mega Millions lottery on Tuesday.
The prize has been going up draw after draw, twice a week, since mid-October, without any ticket matching all six numbers.
It's the fourth time the game's prize pool has exceeded $1 billion,
and if it's awarded this Tuesday it will be the fifth-biggest in history.
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Those 1,100 million dollars would be obtained by choosing to collect the prize in the form of a life annuity over three decades.
In a single cash payment, as most winners choose, it would drop to $568.7 million.
Even though a good part of it would go to pay taxes, what was left would still be more than the money most people see in a lifetime.
According to experts, that can make you a target for people who want to get a piece of it.
Of course, not everyone will take advantage of you, explains Emily Irwin, director of advisory at Wells Fargo Wealth & Investment Management.
“But you never know what will happen,” she says.
If “the inevitable request for money occurs,” he says, “how can you make sure you feel comfortable saying yes or no?”
Here are some tips to avoid problems.
Share the news with as few people as possible
If you beat the stat (your chance of winning is one in 303 million), one of the most important things you should do is share the news with as few people as possible.
“It's hard for even your inner circle to say nothing,” says Susan Bradley, a financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida.
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By hiding your identity from the public, you can minimize the number of people who find out and protect you from strangers who want to take a piece of your profits.
Some states allow you to claim anonymously, while in others you can create a legal entity—for example, a trust—that claims the windfall, thus hiding your name from the public.
Create a plan for how and when to donate
Before you even claim your prize, you need to assemble a team of professionals to help you manage your new wealth.
You must include at least one lawyer, one financial adviser and one tax adviser.
One of the things you can think about during this run-up, with the help of that team, is if and how you want to use some of the profits to benefit other people.
This can be carried if you hit the Mega Millions this Friday (the fourth largest prize in its history)
Jan 6, 202300:37
Some winners tap into their philanthropic side by creating a private foundation or using other ways to make tax-advantaged charitable contributions.
According to experts, if you determine from the beginning which causes you want to support (for example, protecting the environment or fighting hunger), it can be easier and more rewarding to use those charitable funds.
You can also set a yearly limit on your donations, whether to charities or individuals.
Set money limits for family and friends
To share it with family and friends, you also have to set parameters, Irwin said.
“I think it's helpful to think about the terms under which you would give away money,” Irwin said, “are you the family bank now?”
“If there is a catastrophe, will you be there?” he added, “if someone wants to start a business, would you give them capital or would it be a loan?”
The benefit of making a plan, Irwin said, is that you can "eliminate feelings of guilt when you say no."
Also, no limits "could find yourself in a situation where he's depleting funds at an accelerated rate...and saying yes more than he'd like."