Coming into money

Receiving a financial windfall means facing some complex decisions, financially and personally. Before taking any action, consider how this windfall can affect your life. We’re available to help you plan wisely and make the most of this opportunity.

Congratulations. Now what?

Pause to assess your situation and set goals before spending any of your windfall. Consult a tax professional about tax consequences and an estate planning attorney to create or update your will. This is an exciting time, but don't go overboard; live within your means and use your windfall to build a solid financial base.

Of recipients receiving a large inheritance, what percentage spend all of their windfall within 2 years?

That's right.

1 in 3 people who received an inheritance lost all of their savings within 2 years.

Not quite.

1 in 3 people who received an inheritance lost all of their savings within 2 years.

Source: Wescott Financial Advisory Group, LLC. Five Common Pitfalls of Sudden Wealth: Wescott Financial, May 14, 2018. (Latest available data)

Taking the first step

Take your time before rushing into any financial decision:

First, put your funds to work in a low-risk, fully liquid investment like a savings account or money market fund.
Savings accounts are insured by the FDIC (up to $250,000), providing a level of safety that is not available with many other types of investments.
If your total is greater than $250,000, we can provide additional options.

Taking care of taxes

Your windfall may be subject to income taxes:

Most gifts, inheritances and trust distributions won't be subject to income tax when you receive them.
Tax laws are complicated though, so it's best to seek professional advice.
Find out how much you may need to set aside for income taxes and determine what will be left for investment or other uses.

Invest or pay off debt?

Which should take priority? There's no simple answer. Here are some guidelines.

Consider investing if:

Your debt carries a low interest rate
The interest on your debt is tax-deductible (mortgages or student loans)
The proposed return on investment is greater than the interest you are paying

Consider paying off debt if:

You're paying a high interest rate
You have trouble with current payments or need to increase monthly cash flow
You are carrying credit card debt or a car loan which is not tax-deductible

Changes and choices that you haven't previously considered:

1. Pursue a more meaningful career

This could be a chance to change your career path. Analyze your spending needs, investment objectives and long-term cash flow projection. Then consider what you want to do now that you have some flexibility.

2. Buy real estate

It may be a good time to buy property and make a bigger down payment, reducing monthly mortgage payments. But remember this is a long-term investment. You may not be able to get to your cash quickly if circumstances change. And you will have other expenses to consider and cover: real estate taxes, insurance and maintenance.

3. Invest

If you do not plan to use your windfall for day-to-day living expenses, you may want to consider investing it. Take the time to understand your short- and long-term goals so that you can build an investment program that meets your personal objectives and risk tolerance. (See the Investing section for more information.)

4. Share your wealth

Before taking any action, make sure your own long-term needs have been addressed. Don't give in to influence from others to make gifts, loans or impulse purchases that will leave you second-guessing your generosity.

5. Donate to charity

There are many avenues for charitable giving, from volunteering to cash gifts to creating a charitable legacy. If you decide to make any sizable gifts, be sure to discuss them with your team and tax advisor so that you understand all of the tax and cash flow implications. (See the Giving Back section for more information.)

You want to be protected in case of a future lawsuit, divorce or creditor claim. There are different steps to take to protect your assets:

Check your insurance; be sure your coverage is adequate.

Review and update your property and casualty coverages and any umbrella (excess) liability coverage. (See the Insurance section for more information.)

Safeguard against identity theft and fraud.

Your newfound wealth makes you a more attractive target. (See the Identity Theft section for more information.)

Protect yourself, your family and your property.

If the new level of your wealth is well-known to the general public, consider adding personal security measures to keep you and your home safe.

Additional ways to keep your assets safe.

Speak with us and legal advisors about extra asset protection measures.

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Coming into money

Receiving a financial windfall means facing some complex decisions, financially and personally. Before taking any action, consider how this windfall can affect your life. We’re available to help you plan wisely and make the most of this opportunity.

Congratulations. Now what?