Coming Into A Windfall

As the “Boomers” are coming of age, the possibilities of financial windfalls have never been greater. Coming into money can be a life-altering event regardless of the circumstances surrounding the situation.

Whether your windfall is thousands or millions of dollars, wise planning can make those dollars work to improve your family’s financial future for this generation and for generations to come.

Take a moment to ask yourself a few important questions:

• “What does wealth mean to me?”
• “Am I a saver or a spender?”
• “Do I live above or below my means?”
• “What is my opinion regarding debt?”

The receipt of large sums of money carries with it ample opportunities. Not only might this windfall be the chance to start over, but it could be the motivation needed to evaluate your money personality. Most say that attitudes toward money do not measurably change in accordance with bank balances. Therefore, it is imperative that you understand your motivations and pitfalls. You may not like what you find, but without being honest, you cannot change.

A significant financial windfall is usually a once in a lifetime event. Whether it comes from the sale of a business or an inheritance is irrelevant. Deciding what to do with the money depends on your unique situation. You must take into account obligations, commitments, as well as your personal hopes and dreams.

The following are nine tips describing how to proceed down a windfall’s slippery path. Remember that in most cases, this is an extremely rare opportunity, so don’t blow it!

Hire a lawyer

Before you do anything, hire an attorney to represent your interests. An objective perspective could prove invaluable when discussing possible scenarios.

Draft a will

It is important that your asset transfer intentions be documented. An estate planning attorney will not only protect your current interests, but also your future interests.

Talk to or enlist the services of a tax advisor/financial professional

During this time, advisors are more important than ever before. Depending on the size of your windfall, new financial or tax strategies may be in order. Cash flow, accumulation and protection now become priorities.

Also, it is important to think about what will happen after you are gone and, if you have willed the money to someone, who will oversee that transaction for you.

Establish a budget

Be careful not to embark on a new lifestyle that may be unsustainable. Remember, as this windfall is most likely a one-time event, this money must be protected; otherwise, it may be exhausted. You do not need to deprive yourself, but now is the time when it is essential to keep an eye on spending in order to preserve your new found wealth.

Refrain from impulsive spending

Patience is vital as the temptation to purchase that “dream car” will be overwhelming. Remember, there is still a smart way to buy and there may be a tax-favored way to get the possessions you desire. Instead of making impulse decisions, take time to plan and consider your options.

Refrain from lending or donating money

Your new wealth may seem inexhaustible at first, but it may be smart to keep generosity in check during the days and weeks following a windfall. As friends and family “come out of the woodwork,” you may find it hard to turn them down. However, keep in mind that this money has to last a long time and there may be obligations, such as taxes, that you must be prepared for.

Make a list of “financial priorities”

This list should not be a budget, but a compilation of short and long-term goals for your money. Education, retirement, debt obligations, living arrangements, housing and travel are just a few topics to ponder. Consider the time frames for these goals and which events you can really afford.

Be careful whom you trust

Unfortunately, money can bring out the bad in people; therefore, it is important to be wary of whom you trust. From advisors to fundraisers to charities—you are now a target!

Never forget where you came from

If your windfall is from the sale of a business, remember what it took to get to this point. If your windfall is from an inheritance, remember that inheritances happen once, however, the decisions you make may be permanent.

Be smart, plan continuously, then stick to the plans you have made. In the end, your money will do what you intended. Whether it is enhancing your lifestyle, changing the lives of others around you or being the benefactor of a charity, every person feels differently about what they would do with a large sum of money. Finally, remember one thing: there is certainly no rule, nor is there a right or wrong answer with regards to what you do with your money, but history tells us that the majority of people who are unprepared lose it all.