Lotteries and Inheritances: Dealing with a Windfall
Jarrett McKay - Jul 18, 2016
It seems that the ‘size of the prize’ for playing lottery games these days keeps growing. In fact, south of the border in the U.S., the lotteries have been awarding huge sums for their lotteries, in excess of US $600 million, in some cases. In Canada
It seems that the ‘size of the prize’ for playing lottery games these days keeps growing. In fact, south of the border in the U.S., the lotteries have been awarding huge sums for their lotteries, in excess of US $600 million, in some cases. In Canada, lottery jackpots are comparatively much more modest, with the record prize of $63.4 million awarded back in April 2013. Never mind that the chances of winning a major lottery prize are slim, the growing size of the jackpot pools continues to attract buyers for each draw. We fantasize about winning and what we would do if we actually won. And somebody does win on a regular basis.
While lottery winners are rare, inheritances are not. Some estimates suggest $1 trillion will move from baby boomers to a younger generation through inheritances in the next few decades. By one published estimate, 56 percent of us will inherit an average of $300,000 in the next 20 years. Perhaps surprisingly, then, most of us will have to deal with suddenly coming into a significant windfall in our lifetimes.
Would you be prepared? We’ve all heard of the lottery winners who have squandered their good fortune in a short time, though officials say such behaviour is relatively rare. Most of our clients are attuned to investing regularly and, we suspect, that such an event would not be a “life-altering” event.
For others, here’s what some experts suggest: First, sit back, relax, and think. By all means, set aside a bit of money to have fun with initially, but put the bulk of your windfall aside in a short-term Guaranteed Investment Certificate (GIC) or fund, for example. It’s important not to act impulsively. Even $1 million doesn’t make a 25-year old independently rich enough to retire immediately and spend, spend, spend. But wise decisions can change lives: eliminating some undesirable aspect or enriching another.
Then, don’t be afraid to seek professional advice. Professional wealth managers can provide suggestions and broad perspectives about the possibilities to maximize your wealth for the future. By setting up a proper plan with the support of a professional, and with some care and thought, you can ensure your new-found wealth lasts for your lifetime. Better still, you may also have the power to change your life and the lives of your children or grandchildren.
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