Do you have visions of winning the lottery and it changing your life forever? Do you envision all your debts and financial worries disappearing after you hit it big? You’re not alone – it’s a fantasy that many of us share.
Despite that, getting a huge lump sum of money often does the exact opposite of what we expect it to. It can increase your financial obligations and even make your debt situation more complicated! Don’t believe us? Take a look at four lottery winners who ended up bankrupt after accepting a lump sum of cash below.
1. Alex and Rhonda Toth
Alex and Rhonda Toth only had about $25 to their name when Alex made the decision to test his luck by playing the lottery. To their surprise, Alex won the $13 million jackpot. Shortly after their win, Alex and Rhonda both spoke to reporters about their situation. They both were adamant that the money wouldn’t change the way they live their lives.
Not long after making such statements, the couple went on a lavish Las Vegas vacation. Reports suggest they spent over $1,000 a night on a hotel room that they stayed in for about three months. On top of those expenditures, the couple enjoyed live shows, gambling, and did some shopping, too. After their vacation, they moved to Florida and purchased a ten-acre property.
It seems that the IRS had some suspicions about the couple’s spending. The agency believed the couple fabricated some of their gambling losses to offset their lottery winnings. As a result, the government agency said the couple owed millions of dollars in back taxes. In 2006, the couple was forced into filing for bankruptcy. They were both also arrested for tax evasion.
The important takeaway here is that taxes can quickly cause problems for individuals who accept lump-sum payments. It’s always advised that you speak with a financial advisor if you receive a large lump sum. They’ll help you understand how much you owe in taxes and how to report everything appropriately.
2. William Post III
In 1988, William Post III won about $16.2 million from the Pennsylvania state lottery. William wasn’t able to control his spending, though. Within only two weeks of receiving his first $500,000, he’d already spent about two-thirds of it.
William did attempt to invest some of his initial funds into a restaurant business and a used-car lot business. He also spent some of his funds recklessly. Reports suggest he purchased his own airplane for personal use. Within about three months, William found himself in over $500,000 of debt.
To make matters worse, William’s family begged him to invest in their business ventures, too. Those ventures never made any returns, so William sunk further into debt. Things got so bad that William was getting harassed by bill collectors. In desperation, William fired a firearm at one such collector, and he did face criminal charges for his actions. Around that time, he also went ahead and filed for bankruptcy.
TIME reported that William only had about $2.46 in his bank account when he hit it big. Despite that, he told reporters he was happier when he was broke.
3. Denise Rossi
Have you ever felt trapped in a relationship because you didn’t have the money to leave? Apparently, Denise Rossi felt that way, so when she won $1.3 million playing the lottery, she thought all her problems were solved!
Before informing her husband about her winnings, Rossi immediately started divorce proceedings. She failed to disclose the massive winnings and attempted to keep them a secret during the divorce trial. Her husband’s attorney quickly discovered the secret, though, and accused Rossi of violating the state’s asset disclosure laws. During a deposition, Rossi made the mistake of admitting she didn’t want her husband to get his hands on her lottery winnings.
As a result of her actions, the judge ruling over the case agreed Rossi had broken the law. In response, he awarded Rossi’s ex-husband all of Rossi’s $1.3 million winnings. Following her attorney’s advice, Rossi filed for bankruptcy after the ruling.
If you’re considering filing for divorce after hitting it big, then you must make your winnings clear to your attorney and your current spouse. Otherwise, you could forfeit your right to the winnings!
4. Janite Lee
Do you love the idea of winning the lottery because you’d be able to help out your friends and family? Well, Janite Lee’s story will remind you to be cautious about being too generous.
Janite felt blessed when she won about $18 million playing the lottery in 1993. She was passionate about sharing her blessing with others, so she ended up making massive donations to dozens of charities and political groups. Her donations even lead to her getting to enjoy dinner with Bill Clinton and Al Gore. According to reports, she gave a whopping $1 million to Washington University to help them build a new library.
Janite thought she was all set when she decided to purchase her own home, too. Instead of buying it with cash, she decided to buy it on a mortgage, though. She thought it would be a good idea to pay off her house early, but her seemingly smart financial decision actually resulted in massive early payoff penalty fees. In all, she ended up owing $750,000 more in fees for paying off her house early.
By 2001, Janite was in trouble. Reports say she was over $2.5 million in debt. To protect herself, she sold her rights to any future lottery payments and filed for bankruptcy.
Are You Struggling Financially After Getting a Lump Sum of Cash?
Were you recently awarded a substantial lump sum of cash? Did it increase your financial difficulties rather than solve them? There is a way out of your situation. If you’re considering filing for bankruptcy after getting a lump sum of cash, then it’s important to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.