You've just won $20 million in the lottery. Until you figure out what do do with the cash, you want to move it to the safest place you know: US Treasury account(s). But the lottery (per the California winners' handbook) won't do anything more than hand you a paper check. How do you get your check into the Treasury without exposing it to some intermediate bank, thereby risking the money getting tied up or disappearing due to bank failure during the (however brief) time the bank has the cash?

  • 3
    disappearing due to bank failure during the (however brief) time the bank has the cash - what do you mean exactly? That Bank of America, for example, will go out of business just to steal your $20M? BTW: Worth mentioning that the paper check you'd be getting is not a US Treasury draft as well.
    – littleadv
    Commented Mar 22, 2012 at 20:28
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    "You've just won $20 million in the lottery" Oh wow! thanks for the hot news! Where do I send the $1000 check to cover the bank fee? More seriously, while California might be marching to the beat of a different drummer, many state lotteries with large jackpots pay off over many years, and a $20 million win might actually be paid out in $1 million installments (less tax withheld) over 20 years. But if not, console yourself that it will only be $11 million cash to you; the rest will go to Federal and California state income tax withholding. Commented Mar 22, 2012 at 20:38
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    @DilipSarwate There's no tax in California on lottery winnings. It will be only 11 million not because of taxes but because of the fact that the jackpot is calculated based on an assumption of investing current cash and paying the winnings from the return over the long period. Taking a lump-sum payout will only be the original cash, without the proceeds. The tax is the same in both cases - 25% Federal tax.
    – littleadv
    Commented Mar 22, 2012 at 20:40
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    If you win the lottery, I'd assume you could and should hire an accountant to work out these issues for you. Not sure this question has much value to the community unless we have a much luckier community than I'm assuming.
    – JohnFx
    Commented Mar 23, 2012 at 14:26
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    $20M is not huge... Tomorrow's Megamillion's jackpot reached $500M! That's half-a-Billion prize!
    – ysap
    Commented Mar 29, 2012 at 13:13

3 Answers 3


If the funds are deposited into a noninterest-bearing account, they will be covered by FDIC insurance regardless of the amount (However, this extended coverage may not be valid after Dec. 31, 2012):

On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions.

(Source: http://www.fdic.gov/deposit/deposits/changes.html)

  • Do you know if the insurance payout is taxed as a gain? Some are some are not is why i ask.
    – user4127
    Commented Mar 29, 2012 at 15:59

You have a few options:

  • You can cash the check at a "too big to fail" bank with an implicit Federal guarantee, such as Bank of America or JP Morgan.
  • You can look at capitalization ratings such as the BankRate.com Safe & Sound rating, and use a large, stable bank.

Personally, I would cash the check at my broker and buy a mixture of US Government and New York Tax-Exempt securities until I figured out what to do with it.

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    +1 hmm, two bullets, but three options. Your third looks good. Commented Mar 23, 2012 at 5:12

You cant! There is the risk that between the time you get the check and the time you get to the bank that you will be murdered, have a heart attack, stroke, or aneurysm too. And they are probably more likely than the bank going out of business between the time you deposit the money and get access to it.

Prior to accepting the check I would do the following:

Get a lawyer that specializes in finance and tax law. There are some steps you can take to minimize your tax exposure. There is little you can do about the immediate tax on the winnings but there are things you can do to maximize the return of your money. You will want to do what you can to protect that money for yourself and your family. Also create or revise your will. This is a lot of money and if something happens to you people from your family and "friends" will come out of the woodwork trying to claim your money. Make sure your money goes where you want it to in the event something happens to you.

Get a financial planner. This money can either make you or break you. If you plan for success you will succeed. If you trust yourself to make good decisions with out a plan, in a few years you will be broke and wondering what happened to your money. Even at 1% at 20million dollars that is 200k a year in interest... a pretty good income by itself. You do not have to save every penny but you can plan for a nice lifestyle that will last, if you plan and stick to your plan.

Do research and know what bank you are going to deposit the money in. Talk to the bank let them know of your plans so they can be ready for it. It is not every day that they get a 20 million dollar deposit. They will need to make plans to handle it. If you are going to spread the money out among several banks they can prepare for that too.

When choosing that bank I would look for one where their holdings are significantly more than you are depositing. I would not really go with one of the banks that was rescued. They have already shown that they can not handle large sums of money and assuming they will not screw it up with my money is not something I would be comfortable with. There were some nice sized banks that did not need a bail out. I would choose one of them.

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    Another piece of advice I've heard is NEVER to get the check made out in your name. Immediately form a corporation and have the check written to that corporation. Lottery awards are usually not anonymous and when everyone knows you just got a $20M check you will get besieged by fraudsters, charities, and long lost cousins looking to cash in.
    – JohnFx
    Commented Mar 23, 2012 at 14:29
  • @JohnFx - Maybe. When you are talking about this type of money the cost of lawyers fees and a finacial planner to help you is like a $5 bill to the average person today. Not that $% has no value but well worth the expense for their advice.
    – user4127
    Commented Mar 23, 2012 at 15:15
  • the risk is bigger to have the heart attack after the win and before getting the check... :-)
    – ysap
    Commented Mar 29, 2012 at 14:01

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