So you spent most of the day at work, you're tired, emotional and in need of a good night’s sleep. Barely had time to eat, two cups of tea and a nice biscuit.
You then spot your lotto ticket and for the craic check to see if you won anything… the slow realisation comes across your face: you have just won €30.9million in the Euromillions draw...
And someone in Ireland won it last Friday night!
John Lowe of MoneyDoctors.ie takes a look at some of the steps the winner might take…
1. The first and immediate step: finding a bank that is NOT going to charge you for depositing a sum of this magnitude is the first port of call.. the good news is that the government will guarantee the full amount if you lodge in one bank for 6 months as it is a lotto win. After 6 months, you’re on your own but by then you may have decided what to do with your windfall.
a. Currently credit unions are being charged interest by AIB Bank (0.65%) and Bank of Ireland (0.4%) the two pillar banks, for credit unions’ surplus funds deposited with them. Large deposit holders in those same banks will be next.
b. The best demand rate in the country is 0.01% (0.0067% after DIRT Tax) so your €12.7million if you could find a willing deposit taker will earn € 70.91 per month after DIRT tax !
c. You might also buy a new home ( € 4million ?) and a new car ( Mercedes AMG s650 – a mere € 250,000 ) and a huge party holiday celebration ( € 250,000 )
d. Family and friends – with this kind of money, the winner will have several family members and friends in need – this is a time to help and should be looked after.
2. Safe deposits are the next order of the day
a. National Treasury Management Agency (NTMA) are a government body that manages all government funds including those in An Post and while the return is paltry ALL their investments are government guaranteed including their State Savings:
- National Solidarity Bond – 10 year investment yielding 10% tax free on maturity (equivalent to a gross annual rate of 1.43% - the best deposit return in the country!) Maximum investment is €120,000 per person and any withdrawals before maturity lose any interest earned on those sums.
- National Solidarity Bond also have a 4 year option yielding 2% tax free on maturity - maximum investment is €120,000 per person.
- National Saving Certificate – 5 years investment yielding 5% tax free on maturity.. maximum investment €120,000.
- National Savings Bond – 3 year investment yielding 1% tax free on maturity…. maximum investment €120,000.
- PRIZE BONDS (joint venture with FEXCO, the Kerry company) no interest and maximum investment €250,000 per person. You cannot withdraw for the first three months. Then you must give seven days' notice of withdrawal. But, you are in the draw from Day 1.
b. All other deposit takers – up to €100,000 per person in the 6 main banks are guaranteed by the Deposit Protection Scheme – up to €100,000 per person per institution.
c. Some credit unions in general have all reduced their deposit thresholds to as low as €15,000, but your own credit union – where you live or work – might just allow the €100,000 threshold. This is also covered by the Deposit Protection Scheme.
d. An Post – monies in post office accounts are also covered by the Deposit Protection Scheme.
That takes care of the deposit accounts and guarantees. If you as the Lotto winner have a partner (married or civil union) then you can double the above thresholds in cash holdings. Children are different because they will be subject to the Capital Acquisition Tax thresholds.
3. Inheritance/Capital Acquisition Tax, you don’t have to die to give away your money.
a. Parent to child – €335,000 each, tax free
b. Sister/brother, nephew/niece, uncle/aunt, grandchildren - €32,500 each, tax free
c. Everyone else (including me) - €16,250 each, tax free.
4. Charity/philanthropy. In the last five years Warren Buffett has given away €14.7billion and is the #1 philanthropist in the Forbes magazine list. Chuck Feeney had the same philosophy, "giving while living". Maybe you might allocate a minimum of €5 million here, there are many charities struggling so any help will be appreciated.
5. Investment – the stock market has the best returns of any asset class including property. Between 1991 and 2020 the average growth in the S&P 500 Index was 10.72% per annum. Prudence would also dictate that you should invest 10% of your wealth in a precious metal:
a. Gold being the obvious choice and standard. Currently priced at c. €1,641.75 per troy ounce – so 1 stone weight would set you back €367,752. If you wanted to produce a gold statue of Johnny Sexton matching his weight of 90kg, it would set you back €5,211,990! Don’t forget silver, platinum, palladium …
b. Index funds, ETFs, CFDs other sophisticated investment vehicles – you would need expert advice on this.
c. Managed funds are easier to understand and generally have a safety net in the lower numbered funds, they are normally all cash/government and corporate bonds etc therefore a safe haven to retreat to in volatile times.
d. Alternative investments or your favourite collectibles:
- Art (last November, artist Peter Doig, 62, sold his 1990 painting "Swamped" inspired by the film Friday the 13th and set a new world record for his work at £30million - €35.7million!)
- Wine investment (the most expensive bottle of Burgundy and the most expensive bottle of wine ever sold was paid for a bottle of Romanée-Conti (1945) for a mere $558,000 - €493,805!)
- Antiques (The Pinner Qing Dynasty Vase, a piece of Chinese pottery, sold in 2010 for $72.95million – €64.56million)
- Rock 'n roll memorabilia (Kurt Cobain’s 1993 MTV Unplugged guitar – a 1959 Martin D-18E – sold only last year in LA for $8.013million - €7.09million)
- Numismatics or philately
- Cryptocurrencies (a real punt)
There you have it – all sorted, safe and happy for the rest of your life… or are you? Having advised several lotto winners, the key is to find good solid, trusted advice without any vested interests from the adviser….
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.