At a certain point in your life, you may receive a large sum of money. Unfortunately, many people do not have the proper knowledge to manage it correctly. I like to call this “Sudden Money.” This money can come from an inheritance, a personal injury settlement, a Veteran’s Affairs disability compensation claim, or even a big win at the casino or the lottery. Believe it or not, it does happen! However, no matter how you obtained it, what to do with this money can have scary consequences, especially when it comes to taxes.
Easily, the first people who will tell you what to do with YOUR money are the friends and family surrounding you. I tell you, in a non-joking fashion, RUN! First, I often recommend that you never discuss any “Sudden Money” with friends. If you tell them, they will probably give information based on their situation, or how “so and so” used this technique to “beat the system,” and so on. Remember: your situation often differs from those around you. The amounts will be different, and most certainly, the taxes on the money will vary.
As an advisor, we are here first and foremost to assess your situation. The death of a loved one is an incredibly stressful time. Injury settlements and VA claims come with injuries or illnesses that you have had to deal with for many years, and some will continue for a lifetime. Sometimes this money is to relieve you of some of the pain you are going through. However, this pain you are going through can be worsened (mentally) by mismanaging this money.
After assessing the situation, we will then build a plan. However, even after we devise your plan, we do not stop working for you. We know that plans can change, and that is why we meet annually to reassess your situation at the very least. Our job is not to tell you that you cannot spend this money. Paying off prior bills or purchasing big items are things many people do with their money. However, we want to ensure that you are making these moves responsively and not recklessly. We want to help make this money last and prevent it from eroding from high taxes that could come into play.
We also look for situations where you may be taken advantage of by someone who knows you have come into this money. This could be a family member, a friend, or even a stranger/criminal that found out you came into this money. You may think, “this will NEVER happen to me!”. I invite you to sit down with me sometime to tell you how it certainly can.
When it comes to sudden money, always ask for help – but get it from experienced professionals. Don’t make the costly mistakes that many others have made.