October 1, 2014

Florida's Lottery Winners

A-Lotto Money

The financial adviser for a mother and son who won the $590.5-million Powerball in May has seen his life change nearly as much as theirs.

Lilly Rockwell | 10/3/2013

Preserving capital

Because the lottery prize is so large, Madden says, his focus is on preserving the wealth rather than growing it, making sure that it is sustained over a long period of time to share with children and grandchildren. That involves setting up dynasty trusts, which minimize estate taxes. The assets in the trust make distributions to each generation, and the entire trust isn't subject to estate taxes. "It's not only the lives of a couple of people now, but who knows how many lives in the future," he says.

At Brant and Madden's urging, the MacKenzies are setting up trusts designed just for charitable giving, which also ease the tax burden. The New York Daily News reported that MacKenzie committed $2 million to fix the roof at a high school in Maine where her daughter is a teacher.

Madden won't disclose details about how they plan to divvy up the prize money but says there will be "different trusts" that are "substantial in nature."

The size of the MacKenzies' winnings means they're unlikely to blow through their money in a few years. Madden told them with $270 million they could "drive down Ponte Vedra Boulevard, which is a very exclusive area, and buy any home they wanted to, add a 10-car garage, buy 10 exotic automobiles and never touch the income for one year. You're dealing with wealth at an entirely different level."

The MacKenzies may have taken Madden's observations literally. Several newspapers reported that MacKenzie bought a Jacksonville home in the Glen Kernan Country Club community for $1.175 million. The deed to the home was transferred to Melinda MacKenzie, one of MacKenzie's daughters.

A new mindset

Madden says the challenge for any lottery winner is getting over the psychological shock and adjusting to the identity of a wealthy person. Most people buy tickets on a whim, he says, not taking time to seriously think about what they would do if they were millionaires.

"Picture somebody making $25,000 a year and living in a $45,000 house," he says. "Now they are worth $140 million. It's hard to begin to conceptualize the difference between the two."

Meanwhile, the demands of Madden's new client have meant he's had to hire more people to add to his six-person firm. He also had to take additional security precautions, upgrading the security and software systems at his firm. "We've already had intrusions," he says, describing emails designed to glean information about the MacKenzies that he referred to the FBI. "They are after this money."

Madden also hired Brant as his firm's attorney to ensure client-attorney confidentiality protections. And he also reassured his existing clients that he remains focused on their accounts. "They were all very happy for us and thrilled for the firm," he says.

Madden is a "fee-only" financial adviser, meaning he is paid an agreed-upon fee for his services rather than a commission for securities bought and sold on behalf of the client. Madden says he negotiated a fee with the MacKenzies, which he would not disclose. The MacKenzies "wish to have everything as private and personal as possible," he says.

But fee-only financial adviser Susan Spraker, CEO of Maitland-based Spraker Wealth Management, says she charges 0.5% for assets over $2 million. For an estate worth $270 million, that amounts to an annual fee of $1.3 million. Spraker says Madden probably worked out an arrangement for a fee of less than $1 million. "To have a client agree to have that much wealth managed, a special arrangement was probably made," she says.

Brant says he went to high school with Madden and has co-hosted money management shows with him. Madden has an ability to put clients at ease, he says. "Hank is really good at what he does and is good at building client trust and knowing how to diversify and not do crazy things," Brant says.

Madden says the MacKenzies' decision to trust him with such a staggering sum of money was "one of the most humbling experiences I have ever had," he says. "It is a responsibility I do not take lightly."

Tags: Banking & Finance

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