Lottery win could easily be followed by big loss

The perception is once you win the lottery, you are set — you're in great shape. But in reality the battle has just begun," says Andrew Stoltmann, an attorney who has represented lottery winners who have hit financial troubles.

"Often lottery winners do not have much experience with managing money and lack basic investing skills," he says. In turn, they can easily make bad investments, fritter their money away on big-ticket purchases and fall prey to scam artists.

Tales of lottery winners who blew their riches abound. One of the most infamous is Curtis Sharp, an air conditioning technician from Newark, N.J., who won $5 million in the New York Lotto drawing in 1982.

Known for his dapper attire and flashy personality, he became an icon for making it big through lottery luck. A three-piece-suit-clad Sharp even starred in a Lotto ad that showed him cruising in the back of a limousine.

But his funds dissipated.

"The money's gone," Sharp, then 71, told the New York Daily News in 2009. "I bought into a lot of things that went bad."

Wisconsin-resident Andrew Cicero also struggled to maintain his lottery windfall. He lost most of the $5.5 million he won in 1995 to bad investments.

Cicero lived on a pension and Social Security income before he was successfully able to gain some of the money back in lawsuits against his investment and advisory firms that were settled. Stoltmann handled Cicero's case but declined to comment.

Winners who lack financial savvy barely have time to Google "investing tips" before they are deluged with offers from financial planners, scam artists, friends and family. So it's easy for a lottery victor to quickly feel overwhelmed and make poor decisions, Stoltmann says.

For the lucky winner of tonight's Mega Millions — or anyone who lands a large, unexpected windfall — financial advisers offer this initial advice: Keep the news quiet.

"Don't go to Facebook and say you've just won the Mega Millions lottery," says attorney Richard Craig, whose firm has represented past lottery winners.

Sure, it's fine to share the news with close, trustworthy friends and families, he says. But those who widely brag about their newfound fortunes open themselves up to a swarm of legitimate and illegitimate money requests, as well as to potential predatory lawsuits from those who want to get their hands on the riches.

"In this litigious society, you don't want to be a target — so don't purposely draw attention to yourself," Craig says. "You want to do your best to minimize your visibility on the radar screen."

Other tips on how to manage any Mega Millions — or other lottery — windfalls.

Keep that winning ticket safe: Powerball champ Louise White — who won a $336 million jackpot in February — hid the ticket in her Bible. Financial advisers say that's not the best way to go. Instead, those with winning tickets should sign them and tuck them into a safe or safety deposit box, Craig says. He advocates making a few copies of the winning ticket and storing those papers in a separate location.

Create a trusted advisory team: Ask friends, family and professional contacts for suggestions on credible tax experts, lawyers, financial planners and insurance providers. "Few lottery winners have the infrastructure in place to manage a lottery windfall," Stoltmann says. Craig suggests winners create an "advisory board" that can include business-savvy friends, as well as professional advisers. Among its benefits: The board can serve as "a buffer" against friends and family who ask for handouts. This way, a winner doesn't have to solely take blame for turning down a solicitation from a family or friend.

Sit tight for six months: "Don't make any major commitments or financial obligations for six months," Craig says. Instead, just let the win settle in. "It's tempting for a lottery winner to quit his or her job or immediately splurge on a mansion or other large purchase. Don't," Stoltmann says. "The worst decisions made by lottery winners are usually the first few decisions."

Don't rely on the familiar when investing: For the financially uneducated, there is a tendency to invest in a tangible assets — such as a restaurant or car wash — rather than put the money into more liquid, and easily traded, investments such as stocks or bonds, says Ed Butowsky, managing partner at Chapwood Capital Investment Management. "They typically will invest in things they are familiar with and that they can touch and feel because, generally speaking, they don't have the knowledge of investment instruments," he says. Although it's easy to put money into a private investment, such as a restaurant, "it's hard to get the money out." Winners should instead consider public securities over these private investments, he says.

Donate wisely: Don't dole out money indiscriminately to charities, Craig says. Instead, those who want to contribute to a cause should speak with a financial adviser about tax benefits, as well as the possibility of setting up a foundation.

Have fun: It's OK to buy that dream boat or new wardrobe — if it's planned out. "Take some of this, and let it be mad money," Craig says.