Last week's lottery winners have experienced a life-changing event. Winning millions of dollars obviously can make one very popular (and infamous) at the same time. Stories abound of lottery winners blowing through their winnings in less than a decade, and some (like Florida winner Abraham Shakespeare) end up losing their lives because of greed.
While we congratulate the winners, we would be remiss if we didn't say that winning the lottery is a prime time to create an estate plan. However, very few people will win it big (even smaller jackpots of less than $1 million are rare). Nevertheless, people inherit large sums of money everyday.
With that said, it is important to understand the benefits of creating a durable estate plan when these instances occur.
One prime reason is to make sure that the testator's legacy is passed along to future generations. A person who inherits money and fails to create a plan runs the risk of having the legacy destroyed through frivolous spending and existing debts. For instance, a person may incur significant financial liabilities after inheriting money (either through legal judgments or tax burdens). He or she may tempted to make the problems go away simply by writing a check (since the money is there).
As such, it is worth talking to an estate planning who has experience with financial planning so that an inheritance is not only protected through the proper legal instruments, but the money and/or assets do not become a burden when it was intended to be a benefit.
Source: ClaiborneProgress.net, Will Powerball winner turn into lottery loser? August 15, 2013