Just out of curiosity—mostly as, sadly, I don’t realistically expect to suddenly come into half a billion dollars anytime soon—what would be the best way to find a reliable financial advisor to handle that much money? Yelp? The Yellow Pages? 'Just go into my local bank branch and ask for the manager if they can point me to someone?
Win $300 million? Oy! Such problems you now have!
I’d buy a bunch of gym bags, duffel bags, and such. I like liquidity.
ETA: I’m not stupid, I’d get the nice, ripstop nylon duffel bags.
Once you have millions in a bank or place that pays interest, your income tax just got crazy hard to figure and if you do it wrong, the IRS gets more & more of it.
Really really need a good person/institution to help you do all the tax stuff.
I’m old, I would spread it across about 3 banks I like in a no interest checking account. I don’t want interest.
Money I have left for my children & friends will be a cash deal only and they can decide if they want to invest it or put in a mattress. I won’t care.
Name of my game is to not let anyone keep taking cuts of it like the IRS will.
YMMV
The larger banks have divisions designated to handle wealthier clients. Those divisions might be called the “private banking” group. There are also “wealth management” firms and ones that specialize in “sudden wealth”, because some people do go quite quickly from the middle class or upper middle class to extreme wealth. (Say someone who was an early employee of one of those Silicon Valley firms that succeeded.)
And then some people set up a “family office”, which can be an investment group with only one client/owner.
Not really. Interest is taxed as ordinary income. It doesn’t matter how much of it you get.
Income taxes get complicated when you have a lot of different kinds of assets and investments and businesses and stuff. There is nothing about having a large chunk of money that necessitates that, though. Someone dumping a few hundred million in an index fund won’t have any particularly more complicated tax situation than anyone else.
First thing is to put the ticket in a safety deposit box, then set up a meeting with a tax attorney and a financial adviser. Do whatever it takes to minimize tax exposure and invest wisely. It would be easy to set up trusts or whatever that would bring in a couple of million a year to live on.
Actually, the real first thing to do is to sign the ticket on the back. If you don’t do that, and it blows away on your way to the bank to put it in a safe deposit box, it can be claimed by anyone who finds it.
True, but the trade off between T-bills and a money market fund is a little bit less interest, typically, on the T-bill now in the range of fraction of 1% close to 1% for either, v. a very small risk of losing a relatively small % of the principal in a money market fund. Speaking of reputable funds that’s the risk. And in fact under the new regulations which recently went into effect money market mutual funds which don’t only invest in US govt securities have a variable price. The old concept of always posting 1 per share then once in a great while credit losses overwhelmed interest income and they had to 'break the buck', and everyone went berserk (though the price would usually fall to the .90’s) is now mainly gone. It’s more upfront now that a MMMF can oscillate in price to a little below what you paid for it.
Though again for a govt only fund (say Vanguard’s fund VMFXX, 0.96% yield, US govt securities only) you’re only taking govt risk, plus whatever minuscule agency risk you have dealing with highly reputable brokers. You’d have to have the winning shifted to some kind of brokerage ‘sweep’ account to buy the T-bills, and if you set up your brokerage account at Vanguard the sweep money would be in VMFXX.
In contrast under the outright bad advice given upthread to put millions into say a Bank of America account you’re typically getting close to zero (the tiny amount in my BOA savings account gets 0.02% and they don’t give higher rates to big deposits, in fact some big banks in recent years have charged feed to big depositors they don’t to small ones) and though true it’s a lightning strike risk for BOA to go belly up, if they do, as you say, you might lose 10’s of % of the uninsured amount. But mainly, you’re foregoing close to 1% pa for the privilege of taking a small extra risk v T-bill or VMFXX.
ETA, at $300mil you’d be paying steep taxes on ca. $3mil a year in interest income on T-bills or VMFXX, even though those are not state taxable. You might look at a national (not one state) municipal money market or short term bond fund to limit at all plausible losses to a small % and get a bit more after tax interest income.
Assuming the person doesn’t want to venture forth to more serious risk like stocks etc. It’s easy to say ‘why do you need any significant return on that much money?!?’ when you haven’t come into money like that. Once and if you actually did, your outlook might have a way of changing.
Put it in 55 gallon barrels and bury it in the desert.
And then buy another lottery ticket to record the location, and hope that the new ticket doesn’t win where you have to turn it in for your next $300 million. That’s how people lose track of their money.
Things like estimated tax have to be paid in advance and you get a penalty if you are very far off either way.
I am barley smart nuff to do my taxes with no $$ or assets or income, only SS.
Been around a few that do and they spend big bucks on tax people because a mistake at that level makes the IRS jump with joy cause they are going to take a lot of cash from you.
Now, if you are at the 2-5 million in a lot of different things living off of interest and do your own tax and make your own investments, well, I bet it is no sweat for you but for poor folks that have never been there, better plan on an good/expensive tax person to keep it from going away too fast.
YMMV
Wouldn’t it be safer to just take the ticket to the lottery commission right away and then see the financial planner? It’s not as if they just kick you out the door with a check for $300 million - it takes time to verify the ticket and get the funding together to pay you.
The whole $300 million goes into my Vanguard Total Stock Fund. The annual 10 year average (2005 through 2015) is up 7.4%.
This means I’d be making $21 million a year just having the money sit in the account.
Or am I missing something here?
Depends on whether or not you are in a “disclosure” state. Some states allow you to collect winning anonymously. In that case your way is fine. California isn’t one of those states, so before I let the lottery commission know who I was I’d take serious steps to deal with the money and vanish from sight for a few months, minimum.
Perhaps, but there are some angles that people try to work (successfully or unsuccessfully) which you need to have ready when you fill out the claim form.
For example, an elderly couple might want to share the winnings with their children while avoiding gift and inheritance taxes. For example, the Winkler Family managed to convince the Tax Court that they had an enforceable oral agreement to share all lottery winnings among the family that they entered into before Mrs Winkler bought the winning tickets. In contrast, the Tax Court told the Dickerson Family to go take a hike (but not before paying their gift taxes) when they claimed to have set up a corporation to buy their lottery tickets.
But the key to both these cases was to claim the winnings in the name of the family partnership or corporation.
Incidentally, the judge in the Dickerson case had a little fun writing the opinion. Here are the section headings:
I. She’s Got a Ticket To Ride
II. Family Values
III. “Inc.”-ing the Deal
IV. Eye on the Booty
V. House of Waffling (the petitioner was a waitress)
It means what you said, the fund has gained 7.4% pa for the last 10 yrs. There’s no way to say what it will earn the next 10 yrs, which could be negative. Between the sentiment expressed in some posts that the person shouldn’t care what return $300mil made since it’s so large, and putting it 100% in stocks there’s probably a middle ground most people would prefer.
Or at least I would. I can’t see such importance in aiming to grow $300mil into $600mil in just 10 yrs (approx what the total stock market fund would deliver if, big if, it duplicated the last 10 yrs) so much as to not put anything into safer investments. I’d certainly put at least as much into safe investments as I could possibly imagine spending and wanting to leave to my heirs. But that still wouldn’t be the whole $300. I couldn’t see putting the whole $300mil in safe investments either.
For you, perhaps. But what if you had a charity you were interested in? Generating additional personal wealth by investing wisely lets you give more effectively.
“Disappearing” seems a bit much. It’s not as if bounty hunters and brigands are going to set off and track me down, or the commission is going to publish my address and the make and model of my car.