Winnipeg Free Press - PRINT EDITION

Win big? Plan to keep it

When your lottery numbers come in, plan to preserve wealth

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Every year, hundreds of Canadians win $1 million or more in a lottery. Occasionally, their prize is so large it changes their lives.

We gamble in the hope that one day we will be able to live the big life. The common mistake is that we are bound to be happier if we are better off. But while we fantasize about winning big, few of us are prepared for the consequences. Government feeds our fantasies through advertisements displaying happy people wearing big smiles.

Leaving aside tales of misery of those of us who can't control their compulsion to play till they are broke, let's consider the lot of the lucky few. Most of the big winners are not ready for their good fortune and the pressures of being a winner.

The first reaction upon winning is to tell others, but doing so magnifies the excitement and complicates the situation. Best to first tell only close family and ask them to keep the good news to themselves. Until you have the cheque in your hands, contain your excitement and keep your win a happy secret. Provide yourself some time to prepare for your new life.

Before turning in the ticket, seek out the advice of a trusted investment professional and, as well, get tips on personal safety. While Canada is a relatively safe place, there are bad people everywhere; taking steps to protect your family is wise. As for getting financial advice, if you already have a trusted lawyer or accountant, start there. Avoid rushing into major investments. It's likely best to keep a small percentage of the winnings in your chequing account to pay off debts, live and celebrate a bit. Purchase a six-month Canada treasury bill with the rest. This will allow you time before you make any significant decisions. Whatever you do, get a new will, one that reflects your new station.

Thirty years ago, I was involved in a review of the workers compensation program. We commissioned a study on whether the program should continue providing lifetime pensions for the disabled or, in the case of a fatality, the survivors of workers killed in a workplace accident. The shocking conclusion was more than 80 per cent of recipients of large, lump-sum payments (lottery winnings, inheritances, injury awards) lose it all within five years.

Amazing sums can dwindle quickly through wild personal spending, overly generous gifts and poor investment decisions. If you gambled and won with your lotto ticket, you shouldn't gamble with your winnings. A competent investment adviser, one who works for you, not the companies or funds you invest in, is a must.

While you may have enjoyed playing the stock market before your big win, you now need an adviser who, directly or indirectly, will watch your investments 365 days a year. Even when deciding the mix between stocks, bonds and cash in your portfolio, have your investment adviser help you -- let the adviser earn his or her pay.

Prepare for dealing with the expectations of others. Always keep in mind you won, not them. If you have adult children, assess their needs and provide only what is needed and fair, ensuring first that they are equipped to deal with their changed circumstances. For younger children, you could rely on your new will for now and reassess when they are adults, or set up trusts. In any case, you want to be assured your careful approach to investing and spending is not cancelled out by the careless actions of your kids spending what was your money. Remember, the change in circumstances will put pressure on them as well.

As for your extended family, be careful. Gifts to them should be reasonable and fair. Expect jealously and envy -- it's human nature. Friends could be worse -- some may expect you to pick up the bill every time you go out with them. More than likely, you will mostly end up with the friends you had before you won, and only some of them.

As for charities, get ready for an onslaught of asks. Hopefully, you will live a long time and remain rich, so no need to rush into anything. Investment opportunities will abound, so get a new telephone number and have your investment adviser vet the opportunities. Don't rush into anything. Likely you weren't an entrepreneur before you won, so no need to start now unless it is something you always wanted to get into and the investment won't risk your new situation.

After the initial excitement and tasks are done, go on a long holiday. Enjoy yourself away from the crowd. During your time away, discuss where you are going to live and what you want to do with your time. More than likely, particularly with a big win, you will leave your job behind.

If you do win big, congratulations. Ready yourself for a future full of not just fun but also anxiety, difficult choice-making, occasional guilt pangs and the loss of what was your former life.

 

Graham Lane is a retired chartered accountant and former chair of the Public Utilities Board.

Republished from the Winnipeg Free Press print edition December 18, 2013 A9

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About Graham Lane

Graham Lane is a retired chartered accountant who worked in the public and private sectors for 50 years, concluding his career as chairman of the Manitoba Public Utilities Board.

He has also held key positions at Credit Union Central, Public Investments of Manitoba, the Manitoba Public Insurance Corp., the University of Winnipeg, and the Manitoba Worker's Compensation Board.

Before gaining his CA designation in Quebec, he was third in Canada in the then-national intermediate examination. He has a diploma in business administration from the University of Western Ontario and has served on numerous charitable and service boards.

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