So you didn’t win a share of Wednesday’s record $1.6 billion Powerball lottery prize. But what would you do with all of that cash if you did win?

That’s what Powerball’s three winning ticket-holders (in California, Tennessee, and Florida) are asking themselves right now. They’ll share the $1.6 billion prize, each becoming instant centi-millionaires. More than 80 others won $1 million or more.

What all of these folks do next will determine whether their windfalls improve their lives—or leave them suffering.

Indeed, the Certified Financial Planner Board of Standards says nearly a third of lottery winners declare bankruptcy—meaning they were worse off than before they became rich. Other studies show that lottery winners frequently become estranged from family and friends, and incur a greater incidence of depression, drug and alcohol abuse, divorce, and suicide than the average American.

No wonder financial planners joke that if you have enemies, give ’em a lottery ticket.

So where does it all go wrong?

 

First, realize that tickets are like cash: Whoever has possession is the owner. So it’s important to sign your ticket as soon as you buy it, and then store it in a secure place. Otherwise, you run the risk that the ticket could get lost or stolen.

Second, the first person you should tell after you win is a financial advisor and an estate attorney—not your spouse, mom, or best friend, like nearly every lottery winner does.

Although some lottery commissions let winners remain anonymous, today’s social media world makes that virtually impossible. As soon as you start wearing nice jewelry, buying a new wardrobe or an expensive car, or giving cash to anyone, you’ll be outed. And everyone—parents, siblings, friends, neighbors, coworkers, charities, and strangers—will want some of your money. Many will ask for it and some will demand it, arguing that they would’ve shared their winnings with you if they had won. The guilt trips and manipulation will start quickly. Expect also to get plenty of investment pitches: Open a restaurant! Buy a car dealership! Put money into an oil well!

Requests and demands for money is the start of your path to ruin. That’s why you need a financial advisor—to serve as your buffer. When someone asks for cash, “Call my advisor” is all you have to say. Blaming an advisor will help you preserve your relationships (and your sanity).

Third, realize that your newfound pile of cash is far smaller than it seems. Forget that nonsense that taxes will eat about 45% of the $1.6 billion. It’s far worse than that. If you give your best friend $100 million, you (not the friend) will be subject to the gift tax. So unless you get very good tax and estate planning advice, keep all of the money or donate it all to charity, as you could very well lose 90% of the prize to federal and state income and gift taxes. That’s almost all of your winnings.

If you want your prize to produce the happiness you assume it will provide, stop dreaming and start thinking about the realities of managing a fortune.

CORRECTION: An earlier version of this article inaccurately stated that in 2015, Camelot Group found 44% of lottery winners go broke within five years. Camelot Group conducted no such study.

Ric Edelman, chairman and CEO of Edelman Financial Services LLC, a registered investment advisor, is an investment advisor representative who offers advisory services through EFS and is a registered principal of and offers securities through SMH. His is among the few companies that have made the Inc. 500 list three times. Advisory Services offered through Edelman Financial Services LLC. Securities offered through Sanders Morris Harris Inc., an affiliated broker/dealer, member FINRA/SIPC.