In the event you win millions of dollars in the lottery, it's best to be prepared. While I cannot provide the invaluable tax advice you
must seek should you win, some of what follows may help you prepare.
The best thing for you to do (both the safest and the surest route to lasting happiness) is to give all of the money to charity, maybe keeping just enough to pay off all of your debts. This would still put you far ahead of almost eveyone you know. How many adults are entirely debt-free? Imagine the freedom you would have. This would also, in effect, make you wealthier, as you would no longer have monthly mortgage, credit card, auto loan, or student loan payments.
Donating pretty much all of the money to a worthy charity ensures you will have made at least some positive impact on the world. It also should free you from the devestation that winning the lottery tends to take on the winners:
An
example and another
short look at this example.
A British example. One
from Virginia.
These are extreme examples, but understand that being stupidly rich will dramatically alter your relationships with everyone in your life. Family, friends, strangers, almost all will treat you differently. It is the rare person who isn't affected by the sudden presence of millions of dollars. Some people will envy you, some will suck up in hopes of you sharing, some will be ruder just to make sure they are not sucking up, some will con you, some will expect you to be responsible for fixing any misery within 200 miles. And you will likely change too: you'll learn that many people will try to befriend you just because of your riches, you'll learn that you are a prime robbery and scam target, you'll learn that even many people you've always admired get a little funny around that much money.
So the best choice is probably to donate the money to a good charity. If possible, do so anonymously. Maybe save enough out to pay off all of your debts.
However, most of us would eagerly embrace the challenge of living a happy and worthwhile life several millions dollars richer. (Or even several tens of millions dollars... or more.) I would keep the money. Here's my plan for how best to maybe lead that happy and worthwhile life despite the millions.
First off, I'd want to evenly split the money with my immediate family. This would mean, for me, that my younger brother, my mom, and my dad would each get 25% of the winnings. (I haven't spoken with a tax specialist, so I'm not sure how best to do this so that we all end up with equal quarters of the money.) And this gift would have to be irrevocable. I would want them to have as much as I did, and never have to worry about me taking it away.
What I'm trying to do here is primarily selfish: I want at least a handful of people in my life whose motives I do not have to suspect. They will have as much money as I do. They will not be dependent on me to parcel out allowances. They, like me, will share in all of the joys and miseries of sudden wealth.
There are pitfalls here, too, of course. They may burn through their money in a year. It will be awkward for them to accept a gift they might not have made under the same circumstances. They may come to resent the changes the money has wrought in their lives and resent me for giving them the money. These risks and others are present. But I think this gives me the best chance of building a life, post-winning, with at least some of the people I already know and love.
It's only natural to feel that I might feel like I had more of a claim to the money than my family did. After all, what had they done to win the millions? I had bought the winning ticket. I had not lost the winning ticket. I had filed a claim form with the winning ticket. Clearly, the money is the fruit of my labors.
(Quick aside: I've played the lottery twice. I did not win either time, and I was bitter that I hadn't. I will not play the lottery again, since I do not enjoy playing if I am not going to win, and, as much as anything in life can be certain, it is certain that people who play the lottery will not win the lottery. Far better to leave that money as part of a slightly larger tip.)
This is tough, but I have to realize that I have no more claim to that money than anyone else in creation. It looks like the odds of winning the big prize are about 1:120,526,770. According to
Life: The Odds, I have far better chances of dying as the result of a major asteroid collision (1:20,000) or being possessed by Satan (1:7,000). The odds of the average lottery player winning are more than 99.99999999% the same as me (and, as mentioned before, I don't buy tickets), so it's not like buying the ticket is the deciding factor. It's a fluke, entirely random, having nothing to do with how much effort I put into driving to QuikTrip to buy the ticket. If I can accept that the money is not mine by divine right or through some effort of my own, it's pretty easy for me to share equally with my loved ones without saving back a special share for myself.
I'm fortunate in that my parents live together. This caused a problem all its own, though, as it means by giving each of them an equal quarter-share, I'd be making them twice as wealthy as I am, and that hardly seemed fair, even if the money wasn't mine by divine right or through some effort of my own. Greedy bastards. I could give them, jointly, a single share, but that might screw around with their relationship by linking them somehow in a different way or such... best just to give each their own share, to do with what they please. This became more of a problem when, after a casual conversation, I learned they had no intention of a similar four-way split if one of them won the big prize. (They were going to set my brother and I up, but not in as generous of a fashion as I'd planned--see: haven't even won the money yet and it's causing disruptions.)
Here's how I made that all good in my mind:
I'm giving a quarter-share of the prize to Sean, one to Dad, and one to Mom. I'm keeping a quarter-share for myself. Mom and Dad are responsible for the rest of our extended family: grandparents, aunts, uncles, cousins, etc. If anyone else in the family wants to mooch or start up a business or get an expensive medical procedure or run for Congress, they've gotta go to my folks with the double-share.
Now I'm not married, so that's not a concern.
If you are married, and it's not automatic for you to share it with your spouse, then you probably need to get unmarried. If you win before you get unmarried, you're probably going to have to end up sharing more than you'd like. If you're in a relationship short of marriage that's much tougher. There are no easy answers there. I wish you the best as you try to figure it out.
That's how I'd divide the winnings initially.
UPDATE: Dad has announced his intention to split up the money four ways as described above, should he win.
A favorite from Virginia Woolf about struggles with meaning.