Just because it’s a nice problem, doesn’t mean it’s not still a problem.
Here’s a scenario for you: You pick up what appears to be a lottery ticket. You check the numbers for a laugh and discover a winning combination, offering you millions of dollars in prize money. What are the chances of that?
The next day, you get a call from a lawyer. “Uh-oh,” you think. It turns out he works for your Aunt Gertrude’s estate. Just before her passing, she decided not to establish a charity for homeless cacti and other wayward succulents, and has instead left her vast estate in your hands.
The day after that, you get a call from a Silicon Valley tech billionaire who wants to make an offer on your small startup company and all of its patents. The deal goes through. In a matter of days, you are wealthy beyond the dreams of King Midas himself.
Yes, these circumstances are improbable. You have a better chance of being killed by lightning or being hit by falling airplane parts than you do of winning the lottery. And in terms of a large inheritance, your elders are more likely to exhaust their assets than have much to leave behind. That said, these windfalls do happen, and sometimes to people who least expect them.1,2
What if it happens to you? There is no shortage of ways a large financial windfall could get the better of you. First on the long list of things to avoid is spending it too quickly. Another is neglecting any tax obligations that come with the money. You may also simply not have the knowledge it takes to manage your newfound wealth on your own. It comes down to the choices that you make with that money and what is guiding those choices.
The fiduciary responsibility. Your wisest course of action is to seek out someone with the skills to make fully-informed, objective financial decisions, such as an experienced financial advisor. Their fiduciary responsibility means that they will help you build a strategy with your best interest in mind. They know what to look out for, with skills and knowledge to help you cultivate your windfall into something that could support your overall financial goals for years. They will speak frankly with you about your objectives, risk tolerance, and any issues related to your time horizon (for example: does your windfall enable you to retire early, or would it be wise to work a few more years before retiring?). A financial advisor can also offer a holistic support network, with connections that can help you build a team of trusted experts. Assuming they don’t handle tax matters themselves, for example, they may be able to introduce you to a tax professional who can help.
If a windfall has come your way, or you anticipate inheriting money or selling your company, be sure to speak to a financial advisor early on. It may make the difference between a nightmare and a dream come true.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11650 S. State Street, Suite 360
Draper, UT 84020
Citations
Investopedia.com, January 26, 2020
2. blog.massmutual.com, July 28, 2020
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary, Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Advisor, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Fiduciary Report. Cities served in Utah are: Salt Lake County, Utah County, Park City, Salt Lake City, Murray, West Jordan, Sandy, Draper, South Jordan, Provo, Orem, Lehi, Highland, Alpine, American Fork.
