How to Handle Sudden Wealth

To be sure that your dream of newly found wealth doesn’t become a nightmare, you will need a plan. And while that plan might involve giving in to the impulse to go on a spending spree, a better plan is to focus on the long term. Here are the steps you should take to protect your life-changing wealth:

Keep it a secret, at least until you have processed your change in circumstances and created a plan to keep your wealth in place. This will help protect you from potential scammers and long-lost relatives who want to get their hands on your funds.

Take a step back and consider your long- and short-term financial goals. Whether you want to fund your children’s or grandchildren’s education, pay off your debt, create a secure retirement for yourself or set up an emergency fund for unexpected expenses

Get professional help to guide you in formulating a plan that will protect your money. Reputable tax professionals  can educate you about the tax consequences of your windfall. For example, lottery winners have the option of taking their winnings as a lump sum or in an annuity. If they take a lump sum, they will immediately receive 40% to 50% of the jackpot. If they choose an annuity, they will be paid over several years and ultimately receive more money as well as some tax advantages.

Formalize your plan. Once you have prioritized your financial goals, with professional help, you can be prepared to:

• Create an investment plan that is in line with your risk tolerance.
• Review your estate planning documents (will, trusts, etc.) to be sure they still reflect your wishes.
• Determine whether you wish to establish or fund a philanthropic entity as part of your legacy.
• Set aside funds for a splurge —  an international vacation, a new car or a larger home.

Most of the money you come into should not be spent on lifestyle changes. We have all read about celebrities who went through their fortunes and ended up in debt. Life is full of twists and turns. You never know when or if you will come across that pot of gold, but it is best to be ready with a long-term plan if it happens.

Do you have questions?

Count on your experienced team at Ericson, Scalise & Mangan, PC to provide you with sound guidance for your Estate Planning, Elder Law, Real Estate, Probate, Trust & Estate Administration, and other legal needs. For assistance, contact us today at (860) 229-0369, or email us at info@esmlaw.com.