your lottery winnings
How can I insure a $50 million lottery win? FDIC insurance deposits
with a bank only insures up to $100,000 per account holder. Will
any bank accept a $50 million dollar CD and insure that money?
-- Lucky Guy
Congratulations on your big win. The first thing
I'll suggest is that with $50 million you can afford to pay for
advice from a financial service professional. No, Dr. Don isn't
prospecting for your business. It's just that you'll need more help
than you're going to get in this column.
One way to get Federal Deposit Insurance Corp., or
FDIC, insurance on $20 million of the $50 million is to use CDARS,
the Certificate of Deposit Account Registry Service. You deal with
one bank and CDARS works with that bank to ensure that all of your
deposit is FDIC-insured. I've written about CDARS before and suggest
that you read that column
and also check out the CDARS
For the balance, U.S. Treasury securities are considered
risk-free investments when held to maturity. You do face some price
fluctuations day to day with changes in market interest rates, but
the government guarantees the face value of the security at maturity.
You can own these securities in a brokerage account
or in a Treasury Direct account. The brokerage firm in most cases
will be a member of the Securities Investor Protection Corp., or
SIPC. The SIPC is much different from the FDIC, but it does provide
a measure of protection from fraudulent brokerage firms. Here's
what the SIPC says in its brochure, "How
SIPC Protects You."
SIPC helps individuals whose money, stocks and other
securities are stolen by a broker or put at risk when a brokerage
fails for other reasons.
The SIPC doesn't guarantee that your investments won't
lose value, it just steps in to protect you from theft of your securities
or the failure of a brokerage firm. Investments held as cash are
protected only up to $100,000.
If it were my millions, I wouldn't hesitate to invest
in U.S. Treasury securities in an account with a national firm,
many of the large regional firms, a brokerage account with one of
the large mutual fund companies or Treasury Direct.
Finding a home for this money while you're deciding
how to invest is one thing. Sticking it in CDs and U.S. Treasuries
will protect your principal, but you can do a lot better without
taking on a lot of risk, and you're probably going to want to expand
your approved list of investments. Municipal securities, for example,
can provide tax-exempt income, but alternate minimum tax considerations
means you'd want to consult with a tax professional about investing
in municipal securities.
Try to get the big picture about what life goals you
want to achieve with this money and what you'd like to accomplish
with the remainder of the money after you're gone. I'd actually
focus on the life goals aspect before getting too deep into the
how-to-invest-it part. To that end, the Treasuries and CDs are fine
for the short-term.
I wish I had someone to recommend for you on
the life-goal side, but I started out telling you that you'd need
more advice that I could give you in this column. A life coach seems
like a reasonable place to start. Just don't listen to any advice
about investing in a life-coach franchise.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."