It’s 11:00 p.m., and you’re watching the drawing for Powerball or Mega Millions. Or maybe it’s Friday night after work, and you’re scraping your weekly scratch ticket. You stare at the numbers in stunned disbelief, then in amazement. You’ve just won the grand prize!

After checking and rechecking the numbers, finally convincing yourself that you have, in fact, won, and calling family and friends who all promise to keep your big secret, you begin planning all the ways to spend your windfall: your dream vacation to Bali . . . that lakeside home in Vermont . . . the all-frills new car. You’ll update your wardrobe and install a custom walk-in closet to hold it all. You’ll buy season tickets to the Patriots, the Red Sox and the Bruins. Maybe you’ll make a big donation to your favorite charity.

Through all of your “planning,” however, don’t forget the most important thing: how to maintain your family’s privacy and security while managing your winnings responsibly.

When You Win the Lottery, You Lose Your Privacy

Winning the lottery changes your life, but the winnings come at a high price. When you go to the Lottery Commission to claim your prize, you will learn that Massachusetts lottery regulations require you to disclose your name, your city or town, a photo ID and the amount of the prize. Your photograph will be used to publicize the lottery, and your newfound wealth will become a magnet for attention.

Some winners have described the experience as the worst thing that ever happened to them. Lottery winners are bombarded with requests for financial assistance from family, friends, charities and complete strangers. Many lottery winners mismanage their new wealth and find themselves in financial difficulties, even in bankruptcy.

All That Money Can Blind Your Better Judgment

Winning a significant sum of money can be overwhelming. Lottery winners all too often stumble into these pitfalls:

  • Overspending on a new home, a boat or a fancy car, without considering the cost of maintenance, property taxes and other ongoing expenses;
  • Treating the winnings as a bottomless well and adopting an expensive lifestyle until the money is gone—and taxes still have to be paid;
  • Trusting the wrong people who offer to “help” with investments and then losing the money in a scam;
  • Succumbing to pressure from family, friends or charitable causes to give away too much money without planning for the future or understanding your tax liability.

Seek Legal Guidance Before You Claim The Prize

Since you’ll find yourself in the bright glare of publicity as soon as you share your good news with the Lottery Commission, you should seek experienced legal counsel before claiming your prize. You’re not required to claim the prize immediately, and there are significant advantages to being well prepared before your name becomes public. Here are some of the issues to discuss with your lawyer:

  1. Anonymity: You may be able to maintain your anonymity by establishing a trust. In that case, your trustee would accept the money, and your name would not be publicly disclosed.
  2. Structured Payments vs. Lump Sum: You may have to choose between collecting your prize as a lump sum amount or collecting it through annual payments over a period of years. You should carefully consider the implications of that choice. A lump sum payment maximizes your immediate cash, but the number of dollars you’ll receive is significantly smaller than you would receive through annual payments. On the other hand, every dollar you receive in the future will be worth less than the dollar you receive today, because of inflation.
  3. Tax Implications: The amount of taxes withheld by the Lottery Commission may be insufficient to satisfy the tax liability that results from your windfall. The Lottery Commission is required by law to withhold 25 percent for federal taxes and 5 percent for state taxes. If your lottery winnings bump you into a higher tax bracket, however, you may owe taxes in excess of the amount withheld.
  4. Future Planning: You should decide in advance what you want your prize to do for you. You may wish to preserve some of the money to provide financial security for the remainder of your life. You may wish to ensure that some of it is available to your children or to subsequent generations. Identifying such goals—or deciding against them—should be done as early as possible.