A financial windfall can come at different times from different places. Some are emotional and unexpected, like the death of a loved one, and others may be planned, like the sale of a business. Whatever the case, it may bring about a certain level of excitement and also a certain level of anxiety. Often, there are more questions than answers in these situations. It is important to have a plan to guide you through the process.

1. Secure and Protect Your Windfall

In the short term, find a safe and liquid place to park any proceeds. If your windfall is public, you can bet people will seek you out with their opinions of what you should do with the proceeds. Many people will know “the best” thing for you to do with your money. Be careful. Some of these suggestions, such as annuities and other investments, will come with steep redemption penalties if you later find it wasn’t the right option for your situation.

Instead, be pragmatic about the funds. Initially, keep them in an FDIC-insured account at a bank, a Treasury bill, or a short-term, high-grade money market fund. Keep them very liquid, safe, and close at hand. There is plenty of time to plan what to do with it!

2. Assemble a Team of Experienced Professionals

Assemble a team of trusted professionals with experience working with clients who have had similar situations. Your team should include:

• Certified Financial Planner (CFP®): To develop a comprehensive financial strategy aligned with your goals
• Certified Public Accountant (CPA): To optimize your tax position and ensure compliance
• Estate Planning Attorney: To structure your estate and establish appropriate trusts

These advisors shouldn’t sell you anything, but they work as a team to address your personal issues and help you find solutions.

3. Address Time-Sensitive Financial Matters

Some things will need to be addressed on a timely basis. Working with your advisors quickly will give you opportunities for time-sensitive tax minimization strategies, estate and financial planning ideas, and other items that may need to occur within the calendar year of the transaction. This could help you avoid tax penalties for underpayment and eliminate surprises on tax day.

If you know this income will be coming, you should meet with your team ahead of time. This will allow you to strategize your approach and possibly mean more money in your pocket. They should first strategize with you to develop a short-term plan to address any time-sensitive issues. After that, you can work on your longer-term plan.

4. Develop a Thoughtful Sharing Strategy

With a windfall of wealth comes responsibility, as well as the chance to help others. This opportunity begins with you and your family but extends to your friends and community. You are entitled to do what you want with your wealth; however, others may realize your good fortune and potentially want a piece of it. Whether you share it or not is up to you.

Having a plan on who you will share it with and when will provide a framework for communicating with others. You can be proactive with your sharing instead of reactive when somebody approaches you, asking for a loan, donation, investment, or even a handout. Simply put, you are allowing yourself to say “no” when approached. A plan will help you keep and share the wealth on your terms, not at the whim of others.

5. Assess and Manage Your Risk Profile

Depending on the size of the windfall, you may find yourself financially independent. If you are, it’s important to understand how much or how little risk you need to take to maintain your desired lifestyle. This is crucial as unintentionally taking too much risk in the markets could jeopardize your financial independence.

It is important to model out the future and how much you’ll need to fund your goals (new home, funding college, retirement, charitable wishes, travel, etc.). Planning for these in advance should help you reach conclusions on how to allocate the money to the proper investments.

Sometimes, windfalls result from a calculated risk that one has taken, like owning a successful business. It’s important to understand your good fortune and protect it, not take the same risk again and lose it. Addressing your options and examining your need or desire for additional risk is important. Your team should work with you to mitigate risk and maintain financial independence.

IMPORTANT DISCLOSURE INFORMATION