- The Washington Times - Thursday, June 19, 2003

With a $175 million Mega Millions jackpot up for grabs tonight, that familiar question is bouncing across kitchen tables and around workplaces again: “What’s the first thing you would do if you won the lottery?”

The smart answer, some financial advisers say, is to take a deep breath and think.

The Mega Millions game allows players in 10 states, including Maryland and Virginia, to pick numbers for a shot at a steadily increasing jackpot. Like the prize, the odds against winning are high — 135 million to 1.

Ric Edelman, founder of Edelman Financial Services Inc., said winners first should keep quiet.

“Before they tell their spouse or siblings or parents or best friend, the first person they should tell is a financial or legal adviser,” said Mr. Edelman, who has advised three lottery winners, including two in Virginia.

Mr. Edelman taught for nine years at Georgetown University. He has written books on personal finance.

Most lottery winners are unprepared for the “deluge” of well-wishers, media attention and people seeking favors, he said.

Along with taking confidential advice, Mr. Edelman said, winners must accept that they will lose about 40 percent of the award to taxes.

“There’s nothing, nothing you can do,” he said.

But they can change how much subsequent taxes will eat away from their use of the money. For instance, Mr. Edelman would recommend a combination of tax-free, tax-deferred and taxable investments. He is wary of tax-free municipal bonds because of the economy, and considers generating income more important than avoiding taxes.

“[A financial planners] job for them is to preserve the asset and have it grow,” he said. “Very often we see that lottery winners feel they have a bottomless pit. We have seen more than one lottery winner go broke.”

While dealing with taxes is important, “the economics of the situation would be the first question,” said Nancy Sherwood, vice president of Sherwood Associates Inc. in Wheaton.

In tax advising, Ms. Sherwood said, too many factors differ among cases to outline one preferred method.

“The main thing is that every person is individual and needs to talk to someone on an individual basis,” she said.

She would not say whether she had advised any lottery winners.

Susan Bradley, founder of the Sudden Money Institute in Palm Beach Gardens, Fla., said decisions on how to spend the money should follow a period of private contemplation with immediate family members and a “brain trust” of professionals.

“Money gets very hectic if it’s not spoken about,” Ms. Bradley said.

A person must decide his or her priorities in life before spending a fortune toward those priorities, she said.

Otherwise, “this has the potential to challenge all relationships.”

Ms. Bradley, a financial planner who occasionally works with lottery winners, said she has seen few whose lives were fully improved by the wealth.

“They may end up holding on to the money but they’ve lost the relationships,” she said.

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