From Riches To Ruin By Judy Martel • Bankrate.com
Here's a thought to make you feel good as you watch your financial portfolio slowly climb back to 1999 levels: You might be worse off if you had won the lottery.
Unfortunately, in reality, the dream of hitting the financial jackpot isn't the answer to all your problems -- not even all your financial ones. What with family pressure, "friends" in need of some cash, and the overwhelming urge to finally buy whatever strikes your fancy, it's amazing how fast it all turns to dust.
One of the latest to fall victim to the hard reality of sudden wealth is the U.K.'s Callie Rogers, who won a $3 million lottery when she was 16, and is now, six years later, down to her last $32,000. Any long-range plans she had for the money evaporated in youthful urges to party hard and dress in designer duds.
She freely admits she would have been better off earning her money slowly and the hard way. "I honestly wish I'd never won the lottery money," she is quoted as saying, "and knowing what I know now, I should have just given it all back to them."
It's not just the loss of money that sours these former financial high-flyers. It's the loss of trust in people who suddenly come to love them simply because they are rich.
At the risk of generating a collective "Give me a BREAK," the difficulties surrounding sudden wealth are real, and they affect more than lottery winners. Being born into wealth, or what is sometimes known as "the lucky sperm club," requires an appreciation for unearned money that few wealthy dynasties seem to master.
The best of them set up philanthropic endeavors and teach the next generation the basics of budgeting. It's a lesson well-learned by those who spin money's wheel of chance.
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Quiz: Would Riches be Your Ruin?
Lottery Rules Impact Estate Planning
By Don Taylor, Ph.D., CFA, CFP • Bankrate.com
Don Taylorq_v2.gif Dear Dr. Don, Can you leave your lottery winnings in your will?
It depends on which lottery you win, how you receive the winnings and whether you have a valid will. It's important to know the terms in establishing an estate plan.
Lotteries that offer "lifetime prizes" typically would not allow the winner's heirs to inherit. Winning $1,000 a week for life won't have any residual value in the winner's estate.
I'll presume you're talking about electing, or winning, annuity payments and are asking about what happens to these annuity payments when the winner dies before all the payments are made.
The fear that the annuity dies with the annuitant is largely unfounded. The annuity stream becomes part of the winner's estate. If the decedent has a will in place, the will should speak to the disposition of this asset.
One potential issue is in the estate having enough liquidity to pay any estate taxes due on the winnings. To that end, some lotteries provide for a lump-sum distribution of the remaining payments from the lottery authority.