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Sudden Wealth

You’ve Just Inherited a Windfall—Now What?

Inheriting a Windfall

Inheriting a windfall may seem like the answer to all of your financial problems. Yet sudden wealth is often a double-edged sword.

While money certainly allows you more freedom, it can also create new problems if you aren’t prepared to manage it. Fortunately, there are steps you can take to protect, preserve, and grow your newfound wealth, whether you’ve been anticipating it, or it comes as a complete surprise.

Consider taking these steps After inheriting a windfall:

1. Set Your Funds Aside for a Few Months

Though you may be anxious to put your new wealth to work, the best first step after inheriting a windfall is often to do nothing at all. This is especially important if the inheritance substantially changes your net worth. It may take a while to get comfortable with your new reality.

A conservative rule of thumb is to leave the inheritance untouched for at least 90 days. During that time, you can begin to assemble your wealth management team.

2. Determine the Tax Consequences

As Benjamin Franklin famously said, “Nothing is certain except death and taxes.” If you come into a large sum of money, it’s important to understand the potential tax consequences before making any big decisions.

A CPA or financial planner can help you determine your potential tax liability. In addition, they can recommend strategies to minimize the taxes you owe.

3. Eliminate High-Interest Debt

Once you come to terms with your newfound wealth and understand the tax consequences, you can focus on setting financial goals and developing your wealth plan. Typically, a good first step is to eliminate high-interest debt.

If you have so-called “bad debt” like credit card or other high-interest loans, paying it off with a portion of your inheritance can reduce financial stress and save you money over time. Additionally, if you have student loans you’ve been carrying for a while, now may be a good time to pay those off once and for all.

Having too much debt can create a variety of financial challenges. However, that doesn’t mean you need to eliminate all debt. For example, if you’ve locked in a low interest rate on your mortgage, you may want to focus on other financial priorities before paying off your home.

4. Check Your Emergency Savings

No matter your net worth, it’s important to have cash set aside for unexpected expenses and potential setbacks. Tying your wealth up in investments and illiquid assets can create difficulties if you need cash quickly.

Though most financial experts recommend having three to six months of living expenses in emergency savings, this is a broad rule of thumb. Consider consulting with a trusted financial advisor to determine how much cash makes sense for you.

5. Maximize Tax-Advantaged Accounts

Whether you’re working or not, tax-deferred retirement and health savings accounts can be useful tools for preserving more of your wealth long-term. Be sure to review which accounts are available to you and maximize their benefits.

If you’re still working, you may now have an opportunity to supplement your income with your inheritance so you can max out your retirement plan contributions. In addition, individual retirement accounts offer meaningful tax benefits, especially if you plan to invest long-term.

Lastly, health savings accounts (HSAs) offer unique tax savings as you can contribute, invest, and withdraw your funds tax-free, so long as you use them on qualifying healthcare expenses. However, not everyone is eligible to open an HSA. If you have a qualifying high-deductible health plan (HDHP), you may want to explore this option.

6. Invest for Your Financial Goals

When you come into sudden wealth, it’s not unusual for long-lost friends, family members, and other acquaintances to come out of the woodwork looking for opportunities to prey on your good fortune. While you may be tempted to invest in their startup or investment scheme, remember: if it seems too good to be true, it probably is.

Instead, start by creating a list of financial goals. For example, do you have young children you’d like to send to college? Do you want to stop working altogether or buy your dream vacation home?

Then, work with a trusted financial advisor to develop an investment plan that helps you achieve these goals without taking on unnecessary risk. This approach may not seem as exciting as investing in a friend’s startup venture. However, you’re more likely to preserve and grow your wealth following a disciplined investment plan.

7. Treat Yourself

Having a plan for your wealth is important. However, money should also be enjoyed. If there’s something you’ve always wanted to do but money has been an obstacle, now is the time to make those dreams come true.  

Perhaps you can finally take that exotic vacation you’ve been thinking about. Or your dream car is suddenly within reach. There’s nothing wrong with treating yourself. Just make sure you consider your long-term game plan, too.

Bottom Line: If you’re inheriting a Windfall, Manage Your Wealth So You Can Enjoy It Long-Term

Inheriting a windfall can be exciting and daunting at the same time. These steps can help you set yourself up for success, so your newfound wealth lasts through your lifetime and beyond.

If you anticipate an inheritance or other windfall or have recently come into sudden wealth, speaking with a fiduciary financial advisor like Sherwood Wealth Management can help. We specialize in the unique financial planning needs of inheritors and sudden wealth beneficiaries and always put our clients’ needs first. Please schedule an introductory consultation to see if we may be a good fit to help you manage your wealth.

Assembling Your Wealth Management A-Team After a Windfall

Assembling Your Wealth Management A-Team After a Windfall

After inheriting a windfall, the first step towards protecting your wealth is to assemble your wealth management A-team.

If you are the beneficiary of sudden wealth, you’re probably thrilled–but also potentially nervous about how to handle your money. You don’t want to make a mistake and owe a significant tax bill, purchase bad investments that quickly lose value, or overspend on luxury items you don’t really need.

What you do need is a team of highly qualified professionals who have your best financial interests in mind and can work with you to properly oversee your newfound wealth. After inheriting a windfall, consider these four financial experts who can provide you with the knowledge and advice you need.

A Qualified Fiduciary Financial Advisor

When you are the beneficiary of sudden wealth and need assistance with managing it, a fiduciary financial advisor should be the first person you speak with. An expert fiduciary advisor will work with you to understand your priorities for your wealth and develop a comprehensive plan to meet your objectives.                                                               

Unlike product-driven financial advisors, a fiduciary advisor has a legal obligation to put your best interests ahead of their own. Fiduciary financial advisors generally charge for their services based on a fee-only structure and do not receive any commissions for financial products that they recommend. In addition, they are required to fully disclose any conflicts of interest, must be loyal to their clients, and always act in good faith.

If possible, seek out a financial advisor who holds the CERTIFIED FINANCIAL PLANNER™, CFA®, or other advanced designation. These professionals must pass rigorous exams to demonstrate their knowledge and are typically held to the highest ethical standards.

A Knowledgeable CPA With Understanding of Tax Laws

Next on your wealth management A-team should be a Certified Public Accountant (CPA). A CPA is someone who has obtained significant experience and educational training in accounting skills, including auditing and taxation. They must pass four rigorous exams and usually have relevant, hands-on industry experience.

A CPA can advise on tax issues related to inheriting a windfall. They can also recommend strategies for reducing your potential tax liability. In addition, CPAs can coordinate with your fiduciary financial advisor to ensure that any wealth planning initiatives consider the potential tax ramifications.

An Informed Estate Planning Attorney

As a beneficiary of sudden wealth, it’s imperative to appoint a good estate planning attorney as part of your wealth management A-team. An estate planning attorney is a licensed legal attorney who can advise you on how your assets will be valued, dispersed, and taxed after your death.

In addition to probate advice, they can assist you with the following:

  • Creating a will
  • Designating your beneficiaries
  • Establishing a power of attorney
  • Finding ways to reduce estate tax where possible
  • Setting up trusts to protect your assets

In addition, estate planning attorneys may act on your behalf in case of disputes. They can also ensure your will is carried out according to plan when the time comes.

A Trustworthy Private Banker

Lastly, some beneficiaries of sudden wealth choose to enlist a private banker to help protect their assets. Many large financial institutions offer private banking as an enhanced service for high-net-worth clients.

Private banking often gives you access to a dedicated personal banker. You may also receive discounts or preferential pricing on certain products and services. Private banking may be appropriate for some inheritors of sudden wealth. Still, it’s important to note that private banking usually isn’t an adequate substitute for a full-service, fiduciary wealth manager.

Consider Sherwood Wealth Management for Your Wealth Management A-Team

If you’re the beneficiary of sudden wealth, consider working with a fiduciary financial advisor like Sherwood Wealth Management. Our boutique firm helps clients navigate newfound wealth in a supportive environment where your interests always come first. In addition, we help coordinate all aspects of your financial life. We’ll work with the other members of your wealth management A-team to protect and preserve your assets for generations. Contact us today to schedule an introductory call.

Inheriting a Windfall? Here’s What to Do When Friends and Family Ask for Money

Giving money to friends and family

Is giving money to friends and family wise? Not always. Here are our tips for evaluating these types of requests.

For most people, coming into a financial windfall sounds like a dream come true. But it doesn’t always turn out that way. In many cases, beneficiaries of sudden wealth can oscillate between feeling elated and anxious. On the one hand, a windfall may allow you to take care of debts and purchase items that were previously outside of reach. At the same time, you may have concerns about managing and preserving your newfound wealth.

In addition, it’s not unusual for friends and family hoping to benefit from your good fortune to come out of the woodwork following a windfall. While you may feel obligated to share the wealth, doing so may not be in your best interest—or theirs. If you’ve recently gained a significant amount of wealth, here are a few tips on how to respond to friends and family who ask for money.

#1: Don’t Talk About the Value of Your Sudden Wealth

While having new wealth can be a very exciting experience, it’s important not to brag or talk about it too much—especially with people you can’t trust. Some people can have negative intentions and will try to get you to part with your assets through scams or just plain pushiness.

Instead, focus on assembling a team of trusted advisors who can help you manage and protect your wealth. They can also help you evaluate and respond to requests for your money, so you avoid potentially harmful decisions.

#2: Consider Your Own Finances

Before sharing your money with friends and family, ask yourself a few questions about your own finances. For example, are you in a position to loan or gift someone money? Is the amount they’re requesting reasonable? And if you decide to comply, do you know how doing so will impact your finances long-term?

In general, it’s best to avoid giving friends or family any money until you’ve come to terms with your new financial status. You may want to consider hiring a fiduciary financial advisor before making any big decisions with your sudden wealth.

#3: Think About Your Relationship

Consider the relationship you have with the person who’s asking you for money. Has your relationship been close for a long time? Or have you found that since your sudden windfall, they’ve been in the picture more often? Have they been supportive of you and your endeavors in the past? And, most importantly, do you trust them?

Generally speaking, you probably don’t want to lend or give money to someone who’s untrustworthy. Moreover, if the person hasn’t been supportive of you in the past, they probably don’t have your best interests in mind now.

#4: Find Out Their Plans

Be sure to do your due diligence before parting with your money. In other words, find out how your friend or family member plans to use the money you give them and make sure it’s legitimate.

It’s one thing to help someone get back on their feet if they’re experiencing a temporary setback. It’s quite another to give someone money for a new television or risky business venture.

#5: Determine Whether You Can Trust Them with Cash

Some people have serious difficulty managing their finances. No matter how much you help them financially, they always seem to end up back where they started. People who can’t be trusted with cash tend to overspend and ignore their financial obligations. They may even have a long line of creditors after them for overdue debts.

If you know this is true of the person asking you for money, be careful not to enable their bad habits. In these cases, it’s usually best to pay for items directly. That way you’re in control of how they use your money—if you decide to give it to them.  

#6: Don’t Give Money to Friends and Family Expecting to Get it Back

If you decide to give money to a friend or family member, do it with the understanding that you probably won’t see the money again. Even if they say they’ll repay you, telling them the money is a gift can help prevent future strains on your relationship if they can’t make good on their promise.

Finally, remember that the IRS sets certain restrictions around giving and lending money to friends and family. Be sure to consult a trusted financial advisor or tax expert to avoid unnecessary tax consequences.  

Sherwood Wealth Management specializes in the financial planning needs of sudden wealth beneficiaries. If we can help you navigate these conversations and develop a plan for your wealth, we encourage you to schedule an introductory call.

Asset Protection Strategies for the Suddenly Wealthy

Asset Protection Strategies for the Suddenly Wealthy

Sudden windfall beneficiaries typically want to protect and preserve their newfound wealth. Unfortunately, many don’t know where to start–especially as friends, family members, and opportunists attempt to capitalize on their good fortune. If you’ve recently come into a large sum of money, it’s important you keep your assets safe. In this article, we’re sharing asset protection strategies you may want to consider if you’re suddenly wealthy.

Wealth Protection Strategy #1: Strategic Asset Location

Strategic asset location can be an effective asset protection strategy for sudden wealth beneficiaries. You can avoid unnecessary taxes and protect your assets by utilizing certain account types and legal entities.

Tax-Deferred Investment Accounts

Depending on your annual income, the long-term capital gains rate on investments can be as high as 20% in 2021. However, tax-advantaged accounts like IRAs, 529 plans, and health savings accounts can help minimize your overall tax liability. 

These types of accounts typically allow you to grow your assets tax-free. In some cases, you can defer your tax liability until you need the money. 

Trusts

As an estate planning tool, trusts allow you to control how and when your assets are distributed after your death. They can also be helpful if you wish to provide for younger generations without gifting them money outright. 

Trusts also offer specific advantages over a traditional will, such as privacy, tax benefits, and increased protection against legal action. While they don’t replace the need for a will altogether, they can be an effective asset protection strategy. This may be especially true if you wish to preserve your wealth for generations to come. 

Family Limited Partnerships (FLPs) and Limited Liability Companies (LLCs)

Some wealthy families choose to use FLPs and family LLCs to exclude certain assets from a taxable estate. As separate legal entities, FLPs and LLCs can help safeguard family wealth against creditors (and in some cases, divorce). 

Families who form an FLP or LLC no longer own the assets they contribute to the new entity. Rather, each participating member holds units or membership interests in the entity. 

These entities are beneficial since they generally limit member liability. In addition, you can typically discount the value of the contributed property for estate planning purposes under IRS rules. Be sure to consult an expert if you’re considering this option as laws can vary by state. 

Asset Protection Strategy #2: Asset Titling

As an estate planning tool, asset titling (legal ownership) can help protect your wealth as it transfers to future generations. Indeed, even the best estate plans can fall apart if assets aren’t titled correctly, according to J.P. Morgan

Moreover, strategic asset titling can safeguard your assets against outside predators and creditors–especially in a legal dispute. Be sure to consult your financial advisor and/or estate planning attorney as you navigate the complexities of proper asset titling. 

Asset Protection Strategy #3: Insurance

You likely have certain insurance policies already to prevent unnecessary financial losses. Still, as you accumulate more wealth, you may want to consider additional types of insurance to protect your assets. 

Umbrella Insurance

Umbrella insurance is particularly important if your sudden wealth increases your chances of being sued. It protects your assets over and above basic liability and property insurance coverage. In addition, umbrella insurance can help protect your assets against libel, vandalism, slander, and invasion of privacy–events that can deplete your assets otherwise.  

When it comes to umbrella insurance, most experts recommend a coverage amount that matches your net worth, plus your potential future income stream. However, this can vary depending on your personal circumstances and objectives. 

Cybercrime & Identity Theft Insurance

As cyberattacks and identity fraud cases become more mainstream, your risk of being a victim of cybercrime only increases. Depending on the circumstances, recovering from identity theft and fraud can be time-consuming and expensive. As such, some insurance providers offer cybercrime and identity theft insurance as an additional safeguard. 

It’s important to note that this type of insurance doesn’t necessarily reimburse victims for all stolen funds and financial loss. However, it will pay up to a specified dollar amount for financial losses directly related to your identity theft. In some cases, this insurance may also reimburse you for any expenses you incur while restoring your identity. It can also help protect your assets from future attacks. 

Cybercrime and identity theft insurance is just one of the asset protection strategies to safeguard your wealth against cyberattacks and fraud. Check out this article for additional cybersecurity best practices. 

Incorporating these Strategies Into Your Wealth Plan

It’s natural to have questions and concerns about effectively managing a sudden windfall. Working with an experienced wealth manager can help you protect your newfound wealth and preserve it well into the future. In addition, your advisor can help you determine which asset protection strategies make sense for you and your family–and implement them accordingly. 

Sherwood Wealth Management specializes in the financial planning needs of sudden wealth beneficiaries. If you’d like to speak with a fiduciary financial advisor about protecting and growing your newfound wealth, please schedule a call with our founder, Brian Littlejohn. 

4 Estate Planning Strategies to Minimize Taxes on Transferred Wealth

Estate Planning Strategies to Minimize Taxes on Transferred Wealth

Wealthy families may benefit from certain estate planning strategies to minimize taxes on transferred wealth. These strategies may include life insurance, Roth IRA conversions, lifetime gifting, and others.

The Great Wealth Transfer is underway. Over the next 25 years, nearly 45 million U.S. households will transfer approximately $68 trillion to the next generation, according to Cerulli Associates. In addition, many provisions of the Tax Cut and Jobs Act of 2017 will sunset in 2025. This raises questions about future tax rates—especially on the wealthiest Americans.

Indeed, tax laws are always in flux. However, it’s safe to assume that Uncle Sam will want his share, no matter when you transfer your estate. If you expect to leave significant wealth to your heirs, proper estate planning is key. Fortunately, there are strategies you can leverage to minimize your family’s potential tax burden.  

to minimize taxes on transferred wealth, consider the following estate planning strategies:

Strategy #1: Life Insurance

Depending on its size, your estate may owe federal and possibly even state taxes when it transfers to your heirs. Many wealthy families purchase life insurance policies to cover the potential tax liability and preserve the next generation’s inheritance.

Your beneficiaries can also use the payout to fund the expenses they incur settling your estate. A cash reserve can be helpful if most of your wealth is in illiquid assets like property and other valuables.

Strategy #2: Roth IRA Conversion

The SECURE Act of 2019 abolished the “stretch IRA” for most individual retirement account (IRA) beneficiaries. Previously, beneficiaries could stretch withdrawals over their lifetime to minimize their tax burden. Now, IRA beneficiaries must empty the IRA within 10 years of inheriting it.

This is especially problematic for traditional IRA beneficiaries, since withdrawals are taxed as ordinary income. If your heirs are high earners, the tax consequences can be significant. Not to mention, the required withdrawals can place them in an even higher tax bracket.

If you anticipate transferring a sizable account balance, a Roth IRA conversion may be an effective workaround. Roth IRA withdrawals are tax-free if the account has been open for at least five years. Meaning, your beneficiaries can keep the entire balance if transferred in a Roth.

Of course, a Roth IRA conversion doesn’t allow you to avoid paying taxes altogether. Instead, it’s a taxable event for you, the account owner. Therefore, it’s important to work with a financial planner to determine if a Roth conversion makes sense.

Strategy #3: Lifetime Gifting

In many cases, gifting is one of the simplest estate planning strategies to reduce taxes on transferred wealth. Each year, the annual gift-tax exclusion allows you to gift a certain amount (up to $15,000 in 2021) to as many people as you like without incurring the federal gift tax. Moreover, spouses can combine the annual exclusion to double the amount they can gift tax-free.  

Cash gifts are most common. However, you can also use the annual exclusion to transfer personal property or contribute to a 529 college savings plan. Alternatively, the IRS allows you to pay educational and medical expenses on behalf of someone else without incurring federal taxes. The only caveat is you must pay the institution directly.   

Strategy #4: Trusts

Trusts can be effective estate planning strategies to reduce taxes on transferred wealth. For example, a grantor retained annuity trust can be helpful if you’re transferring assets that are hard to value. In addition, lifetime credit shelter trusts allow you to maximize your annual gift-tax exclusion without immediately transferring your wealth.

Trusts are varied and complex. It’s important to consult your financial planner or estate planning attorney to determine if they fit within your estate plan.

Next Steps: Review these Estate Planning strategies With a Trusted Advisor

Your estate plan is a living document, meaning it will evolve as your family dynamics and financial situation change. Be sure to review it often to ensure it remains aligned with your wishes and identify additional strategies to reduce taxes on transferred wealth.

Sherwood Wealth Management specializes in the wealth management needs of sudden wealth beneficiaries. If you’ve recently inherited a windfall, we can help you develop a plan to protect and grow your newfound wealth and preserve it for future generations. To learn more, please schedule a call with our founder, Brian Littlejohn, CFP®, CFA®.

Do You Need a Fiduciary Financial Advisor?

Do you need a fiduciary financial advisor?

It’s often the case that as wealth grows, the associated challenges become increasingly more complex. For beneficiaries of sudden wealth, these challenges can feel brand-new and overwhelming. You may not know who to trust or even what questions to ask. This makes seeking financial advice a daunting task. Fortunately, some advisors have a legal obligation to act in your best interest. In other words, even if you don’t know where to start, they’ll help set you on the right path. Before hiring an “expert” to manage your sudden wealth, it’s important to understand the advantages of working with a fiduciary financial advisor.

Advantage #1: Fiduciary Financial Advisors Put Your Needs First

In its 2019 Financial Trust Report, digital wealth manager Personal Capital found that 65 percent of investors who work with a financial advisor incorrectly believe that all financial advisors make recommendations in their clients’ best interest. In reality, only financial advisors held to a fiduciary standard of care must act in their clients’ best interest. For example, registered investment advisers (RIAs) and CERTIFIED FINANCIAL PLANNER™ professionals must abide by the fiduciary standard.

Indeed, the legal obligation to act in good faith is a significant benefit of working with a fiduciary financial advisor. However, there are related benefits that can help you manage and preserve your wealth over the long term.

Advantage #2: They Provide Advice Rather Than Sell Products

Financial advisors who work for broker-dealers, banks, and insurance companies operate under a less stringent suitability standard. The suitability standard generally only requires a reasonable belief that a recommendation is suitable for a client. In other words, the recommendation can be in line with a client’s objectives and risk tolerance and not be in their best interest.

This difference can be problematic, especially when potential conflicts of interest exist. In many cases, these types of financial institutions incentivize their advisors to sell their products rather than provide objective advice.

On the other hand, fiduciary financial advisors must disclose and minimize all potential conflicts of interest. Even if a recommendation indirectly benefits them, they must communicate the potential conflicts of interest to the client. In addition, they must evaluate alternatives to ensure there isn’t a better option available. This commitment to transparency moves the advisor’s focus away from selling and towards providing unbiased financial advice.

Advantage #3: Their Compensation Is Tied to Your Success

In general, financial advisor compensation includes client fees, sales commissions, or a combination of the two. Therefore, it’s important to understand the difference between a fee-only advisor and fee-based advisor. Only one operates under the fiduciary standard.

A fiduciary financial advisor is fee-only, meaning clients—and only clients—pay them directly for the services they provide. Fee-based advisors, on the other hand, receive client fees but may also get commissions from selling financial products. Since these advisors operate under the suitability standard, they may recommend certain products simply because they pay high commissions.

The benefit of working with a fiduciary advisor is that the fee-only compensation structure helps align your interests. Because it’s common for fee-only advisors to charge a percentage of assets under management, their fees move in the same direction as your investable assets. Therefore, they’re motivated to help you build wealth, not destroy it.

Advantage #4: They Help You Navigate Major Life Events

Life can be unpredictable. Whether you’re dealing with sudden wealth, the death of a spouse, divorce, or a growing family, major life changes can have a major impact on your finances.

One of the benefits of working with a fiduciary financial advisor is that you can lean on them when the unexpected happens. In addition to overseeing your finances when you’re focused on the other areas of your life, they can help you develop a financial strategy for your new circumstances. They can also help you set new goals as your life changes and evolves.

Advantage #5: Hiring a Fiduciary Financial Advisor Can Help You Sleep Better at Night

If you’ve recently come into sudden wealth, you might be experiencing a range of emotions, from anxiety to complete overwhelm. Working with a fiduciary financial advisor can take the burden off your shoulders to make sound decisions with your newfound wealth, so you can sleep better at night.  

If you’d like to speak with a fiduciary financial advisor about developing a plan for your sudden wealth, we encourage you to schedule a call with Sherwood Wealth Management. We’ll help you take the necessary first steps so you can feel more confident about your finances and future.

How to Recognize and Avoid Sudden Wealth Syndrome

How to Recognize and Avoid Sudden Wealth Syndrome

It’s hard to imagine sudden wealth being a bad thing. Few of us would turn down a winning lottery ticket, an unexpected inheritance from a long-lost relative, or a cash bonus from an employer. Most of us have already fantasized about how we’d spend it. Nevertheless, sudden wealth syndrome is a very real condition that often presents itself in people who receive an unplanned financial windfall. Since it can lead to potentially negative outcomes, it’s important to be able to recognize the signs.

What Is Sudden Wealth Syndrome?

Sudden wealth syndrome (SWS) refers to the psychological stress or identity crisis individuals who abruptly acquire wealth often experience. For many people, sudden wealth may come from a large inheritance, a divorce settlement, or the sale of a business. However, the recent explosion of bitcoin millionaires suggests that SWS is becoming a relevant concern for casual investors, as well.

Sudden wealth syndrome can manifest itself in a variety of unfavorable ways. For example, some people isolate themselves from family and friends. Others become paralyzed by the fear of making a wrong decision. Still others behave impulsively, making decisions they later regret. Regardless of the symptoms, sudden wealth syndrome can prevent you from living a full and prosperous life.

How to Avoid Sudden Wealth Syndrome

Fortunately, sudden wealth syndrome is preventable. If you begin to spot its signs, there are concrete actions you can take to adjust to your new financial status and make sound decisions that support your values and goals.

#1: Take a Beat

When you first come into new money, you may be tempted to buy all the things you couldn’t previously afford or pay off lingering debt. However, this is also the time when long-lost family members and friends tend to come out of the woodwork to ask for financial support.

It’s natural for your emotions to run wild initially. The key is to not let them affect your ability to make good decisions. Instead, hit the pause button. Spend a few months adjusting to the idea of having wealth and what that means for your future. Moreover, make sure you’re mentally prepared to meet the challenges and opportunities that await you.

In the meantime, keep your cash in a savings account or money market fund so you don’t feel pressured to make any decisions before you’re ready.

#2 Assemble Your Financial Team

The idea of hiring a team of advisors to help you manage your money may feel overwhelming in itself. However, a well-rounded team of specialists can help you protect and preserve your wealth for the long term.

For example, your financial team may include:

  • An attorney who can establish appropriate legal entities to protect your assets.
  • A certified public accountant (CPA) who can advise on near- and long-term tax considerations.
  • A fiduciary financial advisor who can help you identify your financial goals and develop a long-term financial plan to meet them.

You may already have relationships in place that you can leverage to help you accomplish your financial goals. If not, give yourself enough time to interview potential candidates until you’re confident you’ve found a team that will act in your best interest.

#3: Set Financial Goals and Develop a Long-Term Plan

If you’re suffering from sudden wealth syndrome, you may feel like your finances are controlling you. However, as you set goals and develop your plan, you’ll realize that you’re actually in control of your finances.

Financial goals can include anything from paying for your children’s college education to buying a vacation home. As a recipient of sudden wealth, you may find that once lofty goals are now well within reach. In other words, you may need to reevaluate your objectives and set a few new goals. For example, you may want to explore a charitable giving strategy or revisit your estate plan.

Once you set your goals, you’ll want to develop a financial plan and investment strategy that support them. These will serve as your roadmap for navigating future financial decisions. Moreover, adhering to a plan will help you avoid letting your emotions take over.

#4: Be Present and Enjoy Yourself

Finally, don’t forget to enjoy your new financial status. Sudden wealth can create stress, but it can also alleviate it. While money alone doesn’t make us happy, it does give us the freedom to pursue what’s most important to us. So, if you previously found yourself consumed with anxiety about the future, give yourself permission to finally put those fears aside and enjoy what you have.

Of course, you don’t have to wait until the signs of sudden wealth syndrome appear to take action. If you’ve recently come into sudden wealth and want to speak with a financial advisor about next steps, we encourage you to contact us. We can help you develop a plan that supports your goals and ambitions while preserving your newfound wealth.