What Financial Advisors Can Do for Lottery Winners

The $1.8 billion Powerball jackpot in September 2025, the second-largest in history,¹ reminds us once again how dramatically a lottery win can change someone’s life. Even before a winner is publicly known, the sheer size of the prize highlights the unique challenges that come with sudden wealth. Beyond the initial excitement, lottery winners face complicated questions about taxes, investment strategies, personal security and privacy. A financial advisor can help bring clarity to these issues and provide a plan for preserving and growing the winnings.

How Winning the Lottery Can Create Problems

Plucking a lucky ticket in Powerball or a state lottery can solve many old problems while simultaneously creating new ones. Many of these concerns are well outside the experience of the average person. What account do you use to receive a six-or-seven figure deposit? How do you deal with friends and family who come to you for help? What are your investment options? 

Thankfully, financial advisors, especially those who specialize in managing windfalls, help clients who suddenly receive a lot of cash. It doesn’t matter whether you’re receiving money from the lottery or a large inheritance, the financial advisor can help you decide what to do and how to address the new problems that sudden wealth can bring.

How a Financial Advisor Can Help Lottery Winners Right Away

If you win the lottery, there are several steps to consider as you adjust to your new financial reality. Preparing for potential challenges and making strategic choices from the start can help you make the most of your winnings. Here are some key areas where a financial advisor can provide valuable guidance:

What to Do First

While you may have dreamed about winning the lottery, the reality of handling such a windfall can be overwhelming. A financial advisor with experience in managing sudden wealth can clarify your immediate options and help you create a long-term plan. This support can be essential in identifying what to address now and what to plan for in the future.

Timing and Communication

Securing your ticket is a top priority, and a financial advisor might recommend placing it in a bank safety deposit box right away. Additionally, maintaining confidentiality is crucial to avoid unsolicited requests for loans or investments from others. There’s no need to rush; lottery winners typically have up to six months to claim their prize, giving you time to work with your advisor to develop a thoughtful financial strategy.

How Financial Advisors Can Help Lottery Winners Long-Term

Once the winning ticket has been verified, it’s important to build a financial plan before you’ve received the money. The last thing a lottery winner wants is to be unprepared when the money starts flowing in. This includes knowing where to deposit the money, as well as how to set up a strategy for investing and deciding how to spend.

Here are the long-term things a financial advisor can do to help a lottery winner:

Assembling a Team

A lottery win of life-changing proportions calls for a team of experts. In addition to the financial advisor, a lottery winner often hires an attorney and an accountant. An attorney may prepare a trust to protect the winnings from publicity, while an accountant can mitigate the inevitable tax bite. The financial advisor’s role is to assess your financial goals and prepare an investment plan that will help accomplish them.

Maintaining Anonymity

Many states let winners claim prizes without revealing their identities. That can be invaluable for avoiding unwanted requests for funds. Setting up a blind trust with the help of an attorney can keep your name completely out of it.

Choosing Lump Sum or Annuity

This decision will draw on the expertise of the financial advisor as well as the accountant. Taking the lump sum allows for more flexibility and, potentially, greater investment gains than receiving winnings in annual payments. However, choosing the annuity payout may be better for smaller wins and younger winners, and also could reduce overall tax liability.

Managing Taxes

Federal and, in most jurisdictions, state income taxes consume big chunks of lottery winnings. Financial advisors can help devise strategies such as charitable gifts to reduce this burden. For instance, making a large contribution to a donor-advised fund or private foundation can reduce the first-year tax bite while giving time to decide what charities will benefit.

Handling Requests

One of the most challenging aspects of sudden wealth can be coping with requests for gifts, loans and investments from friends, family and outright strangers. A financial advisor can suggest practices to manage this, such as offering loved ones one-time gifts up to the federal gift tax exclusion limit. An advisor can also investigate investment opportunities to ensure they are legitimate, above board and aligned with your objectives and profile as an investor.

Investing Wisely

Even a very large win can eventually be lost through mismanagement and poor decisions. A financial advisor can help you avoid this tragedy. They will usually start by discussing your spending goals and investment objectives. Then they’ll help you prepare a plan for achieving them with the help of time-tested investment vehicles and strategies. Finally, they’ll assist you with managing your investments so the life-changing impact of a lottery win is more than temporary.

Common Financial Mistakes Lottery Winners Should Avoid

Spending too much, too fast is one of the most common mistakes lottery winners make. Without a clear financial plan, it’s easy to burn through large sums quickly on houses, cars and gifts. Many winners overestimate how much they can safely spend after taxes and forget to factor in long-term needs such as healthcare, investment income, and estate planning. A lack of budgeting can leave winners financially strained within a few years of their windfall.

Another common mistake is making financial decisions without qualified advice. Friends, family and strangers may present business ideas or ask for loans. Some winners fall into scams or invest in high-risk ventures without proper due diligence. Others rely on informal arrangements or unverified advice. Working with a team that includes a financial advisor, tax expert and attorney can help assess requests and protect against fraud or poor judgment.

Ignoring tax obligations is another frequent error. Lottery winnings are subject to federal taxes, and many states also tax the prize. Winners who don’t set aside enough for taxes risk owing the IRS more than they expect. This becomes especially problematic if they give away large gifts or make major purchases early. Consulting a professional about how to structure gifts, donations and investments can help avoid unnecessary tax burdens and preserve long-term wealth.

Bottom Line

A financial advisor can help a winner address key decisions, such as how to safeguard the winning ticket, whether to take a lump sum or annuity payout and how to manage taxes. Advisors can also guide winners on forming a team of legal, accounting and financial professionals, maintaining privacy where possible and developing strategies for supporting family and charitable causes. In addition, they can help avoid investment schemes and prepare a long-term financial plan to preserve and grow the winnings responsibly.

Tips for Investing Windfalls

• When you’re looking for a financial advisor to help you decide what to do with any sudden windfall, interview a few to find one with appropriate qualifications and experience. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Restraining the urge to splurge often is part of responding wisely to a lottery win. However, it may not be necessary or even wise to completely suppress these impulses. Many financial advisors suggest taking a modest portion of your winnings, perhaps 5% of the total, and splurging on whatever your heart desires, with little or no thought as to whether or not it’s a financially wise move. The idea is that a small binge may satisfy the desire to behave as if money is no object and help avoid a possibly disastrous major spending spree and you can still establish a nice retirement income.

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