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When wealth managers win the Powerball lottery
Old 12-07-2011, 06:27 PM   #1
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When wealth managers win the Powerball lottery

After the winning lottery ticket was announced, these guys were driving Connecticut nuts because they didn't immediately come forward. When they finally did it was because they'd formed a trust, lawyered up, and hired a publicist.

Powerball: Connecticut money managers strike it rich -- via lottery - latimes.com
3 Connecticut money managers who hit $254M Powerball jackpot to donate $1M to veterans groups - NY Daily News
Quote:
A trio of money managers who shared a $254 million Powerball jackpot said Sunday they were kicking off charitable donations by splitting a $1 million gift among five veterans service organizations.
The trust was created by Greenwich, Conn., wealth fund managers Greg Skidmore, Brandon Lacoff and Tim Davidson after they learned they had won the jackpot.
The owner of the store who sold the ticket also won $100,000.

Judy Martel's Bankrate.com blog:
How to manage a lottery win | Bankrate.com
Quote:
The partners in a wealth management company opted for the lump sum of $103.5 million instead of a 30-year annuity, a smart move if the highest income tax rate rises from 35 percent to 39.5 percent at the end of 2012. In addition, if one of the three were to die soon, heirs would be on the hook to pay estate taxes for the present value of the gift even if it were being paid in installments over 30 years. That would mean they'd have to come up with a big chunk of change before the estate even received all the lottery winnings.
Read more: How to manage a lottery win | Bankrate.com How to manage a lottery win | Bankrate.com
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Old 12-07-2011, 07:56 PM   #2
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Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.
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Old 12-07-2011, 08:37 PM   #3
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New preferred asset allocation: 99.99 percent in the markets, .01 in the lottery.
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Old 12-07-2011, 09:13 PM   #4
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Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.
If the prize were "no taxes for life" lottery demographics would expand.
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Old 12-07-2011, 09:54 PM   #5
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So they really did win it? There was speculation, especially given the deadpan faces they had, that they were actually acting as agents for an anonymous winner.
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Old 12-07-2011, 11:16 PM   #6
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Were they rich? Probably, but I haven't heard that said on the news. Even money managers can have too much debt.
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Old 12-08-2011, 11:02 AM   #7
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They've sworn that they are the sole beneficiaries of the trust they formed, so probably it is legit.
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Old 12-08-2011, 02:45 PM   #8
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From a link in the article: "the three have said they plan to use their investment expertise to increase the amount in the trust."

Wow, too bad ordinary people can't do that themselves without the help of highly paid advisers!

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Old 12-08-2011, 02:55 PM   #9
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Well, considering what most lottery winners do after they win, it should be interesting to see how pros manage the assets. I read all I can on lotteries and their "winners" and most are penniless in a remarkably short period of time after winning.
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Old 12-08-2011, 03:36 PM   #10
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Never played the lottery, so I won't have to worry about winning. My biggest fear of winning (even a mil or 2) would be the "poor" folks camped out at your door or the reams of mail you would receive begging for help. I watched one of those "Lottery Winners" shows once and one of the winners had to threaten the Post Office to get them to stop forwarding letters to him addressed "Lottery Winner, Podunk, IL".
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Old 12-08-2011, 03:58 PM   #11
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Hmmm - I read the Postscript chapter of Ben Graham's The Intelligent Investor and Goggle up Wm Bernstein's 15 Stock Diversification Myth periodically to remind myself the odds are against me BUT

I do have a few good stocks. Not a pure Boglehead.

heh heh heh - haven't bought a lottery ticket when I gassed the car in years BUT Do I feel Lucky? Well do I? This thread has me thinking.
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Old 12-08-2011, 10:51 PM   #12
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Originally Posted by arebelspy View Post
Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.
There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.
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Old 12-09-2011, 08:08 AM   #13
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I wouldn't necessarily assume that these guys are stupid for playing the lottery.
Certainly not.
OTOH, I think it's dumb to buy more than one ticket, in hopes of "improving your odds of winning."
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Old 12-09-2011, 08:45 AM   #14
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I occasionally buy a lotto ticket; I figure I waste a dollar in lots of other ways, too...

With my current situation, I'm quite happy to manage my own finances. But if I was to magically win $100M or so, I'd probably seek some advice, too, from pros in lawyering and estate planning, etc.
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Old 12-09-2011, 09:31 AM   #15
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Originally Posted by clifp

There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.
Yeah, I've read similar stories. One fun scratch one in Canada. I assume this wasn't the case here.

Certainly some smart people play the lotto for their own reasons. I gamble occasionally (live in Vegas and only gamble when friends are in town, categorized as entertainment in the budget). But I maintain that the statement "Most people smart enough to make moves like that wouldn't be playing the lottery" is correct.

Funny side note. Autocorrect tried to make "friends", above, into Freud. So it said "only gamble when Freud is in town." A literal Freudian slip!
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Old 12-09-2011, 12:10 PM   #16
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Originally Posted by clifp View Post
There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.
Be that as it may, nobody puts you in jail if you refuse to pay the powerball tax, but they will if you refuse to pay other taxes.

I favor any voluntary tax over a coerced one. The poor need agency as do the middle class and the affluent. We can bet all kinds of ways, including flights to Las Vegas, socks and bonds, commodities and the lottery. For many poorer people, the lottery is it. And if you don't think that gambling plays a meaningful part in a man's life, including a poor man's, just attend a few cock fights in Latin America. In fact, you should be able to find a few right there in Hawaii.

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Old 12-09-2011, 01:11 PM   #17
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Personally I am glad to see these folks win as I think it is safe to assume these guys won't be bust and back on welfare in a couple of years like lots of lottery winners seem to do.

As for comments about how dumb it is to play the lottery, I'll confess I play regularly and am not ashamed to admit it. Personally I don't think playing the lottery is any dumber than paying $3 for a coffee at Starbucks or paying for a soda when you could be drinking free water when you dine out. It's each to their own.
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Old 12-09-2011, 02:06 PM   #18
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I read all I can on lotteries and their "winners" and most are penniless in a remarkably short period of time after winning.
True, but it sounds like these guys are pulling down some pretty good money, so maybe they won't feel the need to buy ANOTHER cigarette boat or two or 10........
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Old 12-09-2011, 04:13 PM   #19
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Interesting discussion. I would never criticize anyone for playing the lottery - if they can afford to lose. I would only call it "dumb" if you thought it was more than entertainment - with the extremely thin chance of becoming an instant millionaire. Never played, but when I was feeling low at w*rk, I often considered buying one (1) ticket to stick in my desk. For the $1.00 entry fee, I could have fantasized for a week about winning enough money to escape. That would have been well worth it and the only way I would have ever played. Folks who buy multiple tickets do stand a statistically greater chance of winning, but it is still an extremely small chance. For this reason, multiple tickets never made sense to me. One ticket is all you need to fantasize. Any more than that and you are truly playing a loser's game (IMO). Still, if it weren't for those playing large numbers of tickets, the lottery would not work. The pots would not build up to the multi-multi millions as they do when many people buy 10's to 100's of tickets.

Without getting too political (I hope) the lottery is (arguably) the only tax that some folks pay. That at least gives them a little skin in the game. Personally, I don't favor lotteries as money makers for gummints, but, since they exist, they are fair game for discussion as FIRE vehicles or FIRE activities. Hope someone here wins a big pot. Love to hear how it affects your FIRE plans. I'll fantasize along with everyone else about that possibility. Good luck and, YMMV.
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Old 12-09-2011, 04:39 PM   #20
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Personally I am glad to see these folks win as I think it is safe to assume these guys won't be bust and back on welfare in a couple of years like lots of lottery winners seem to do.

As for comments about how dumb it is to play the lottery, I'll confess I play regularly and am not ashamed to admit it. Personally I don't think playing the lottery is any dumber than paying $3 for a coffee at Starbucks or paying for a soda when you could be drinking free water when you dine out. It's each to their own.
I will buy a starbucks coffee if i'm traveling because i want a decent cup of coffee (i'll concede it being overpriced.) i will also pay "a lot" for a beer i like at a jazz club instead of getting water. i'm willing to pay a premium for drinks when i can't supply my own if i'm in the proper mood for one. that's my rationale for the expensive drink thing.

So what is the "(irr)rationale" for lottery tickets ? Maybe it's not easily expressed ? Is it for the emotional bump / daydream that ensues when you muse on the possibly of winning ? I never got that so i don't buy lottery tickets (or gamble).

On an amusing final note. I have found i'll irrationally go run firecalc on occasion just to see the heartwarming "yes you have enough money to retire" results even when i know that it will tell me that before running it. Maybe I should make a poll on the to see if there are any other "compulsive firecalcers"
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