The way to come into a large sum of money

derfy, Flickr

Let’s begin with the end in mind. Most people start companies with the goal of becoming very wealthy.

It is framed in the entrepreneurial mind as chance to achieve lasting independence, to be able to rise above the mundane demands of everyday life and to be able to “give back” to the world in a creative and personal way. Why else work so hard?

So let’s imagine you are about to achieve the big score. You have sold your startup to Google, you have won the lottery, you have written a best seller that gets translated into 32 languages and optioned for a major motion picture. You are so close to a big pay day you can taste it but it hasn’t quite arrived yet.

Now what?

Too much money rolling in too quickly can make even accomplished people stupid – just ask MC Hammer or Jack Whittaker. For some people getting a large sum of money overnight is like being handed a stick of dynamite and a lit match. Despite their best intentions, they will feel compelled to compete with Lindsey Lohan in the bad decisions section of Star Magazine.

On the other hand, as with almost anything in life, there is a smart way to do things and a stupid way to do things. Only last month somebody bought a lottery ticket at a gas station in Stamford, Connecticut and demonstrated a smart way to come into an extremely large sum of money.

It all started back on November 1st when the lottery computer at the Shippan Point BP randomly generated the numbers of 12, 14, 34, 39, 46 and 36 for a Powerball ticket. In less than 24 hours fate turned the $1 into a $254,000,000 annuity.

Despite this extraordinarily sudden stroke of fortune, whoever bought the ticket did not feel obligated to come forward into the spotlight. Weeks passed and lottery officials ran ads on highway billboards encouraging the winner to collect. Finally on November 28th Jason Kurland, an attorney for the Putnam Avenue Family Trust contacted the lottery on behalf of Gregg Skidmore, Tim Davidson, and Brandon Lacoff, money managers at Belpoint Capital, a Greenwich wealth management firm.

Rather than accept a 30 year annuity stream totaling $240 million, they elected to have the trust paid a lump sum (after taxes) of $103.5 million. There are a number of sound financial reasons for doing this. With the current top tax rate of 35 percent expected to increase to 39.6 percent at the end of the year this move would save a lot in taxes. Receiving all the money now instead of over the decades also reduces the risk of inflation and a trust makes planning for estate taxes easier.

When the trio collected their winnings they pledged through their attorney to donate a large amount of the jackpot to charity. As of this writing, the trust has already given $1 million to various Connecticut veterans groups.

Splitting a winning ticket is not uncommon among lottery winners. Something similar happened in 1991 of South Boston, when Whitey Bulger won the Massachusetts State lottery. Whitey was the most well known, if not most notorious resident of the predominantly Irish working class neighborhood of Southie. Illegal gambling was Whitey’s primary occupation although he also moonlighted as an informant to the FBI. Despite his out-of-the box career, some residents of the Southie saw him in a positive light, as sort of an Irish Robin Hood who protected the poor and weak among them. Boston being Boston, outside of his own community most found Whitey a figure of less regard. Back in the day, a friendly Boston Globe columnist Mike Barnicle distinguished Whitey’s winning the lottery as “good things happen to good people” although many felt it was more the case of “the good Lord helping those who help themselves”.

The $14 million winning ticket had actually been purchased by one Michael Linskey, who bought it at liquor store which Bulger coincidentally happened to own. Since some of Whitey’s other business interests included extortion, drug-running and murder, Linskey prudently recalled his agreement to split the winnings with Bulger when it came time to collect the money.

Now I, for one, am not going to question the luck of anyone thought to have committed 21 murders, finked out the Mafia, and managed to avoid both prosecution and retribution for most of a long life, so maybe Linskey agreed to pool his winnings with Bulger before he bought the ticket.

In the case of the three wealth mangers from Connecticut, their story has also generated a lot of skepticism. Many think, including a few who know them personally, that the actual ticket holder was an existing client of the firm who wished to avoid the spotlight.

That is understandable since winning the lottery is likely to attract the attention of long lost relatives, fund raising officers of every kindergarten, primary school, high school, college, and graduate program you ever attended, gold diggers, drug pushers, insurance salesmen, car dealers, kidnappers, and the Whitey Bulgers of the world.

Did Davidson really buy the ticket at the BP gas station? I wasn’t there and I don’t know but according to their publicist they are back at work everyday. So for a moment let’s pretend they were just the team picked to manage the money for someone else. The smart moves that mystery person made, which you can learn from include:

1) Being were represented by a competent lawyer,

2) Working out a plan for how the money is going be invested and who is going to manage it before collecting it,

3) Understanding the tax implications,

4) Setting aside a healthy amount for charity,

5) Keeping a low profile and not exciting base human emotions like greed and jealously

Its better to let the world notice your good fortune by wearing better looking clothes and dating better looking people than seeing you holding the big check on TV.