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Three steps for navigating a wealth windfall

September 01, 2021

Three steps for navigating a wealth windfall

Synopsis
5 Minute Read

Inheriting a significant amount of wealth can be exciting and intimidating. These three steps will help you avoid making common mistakes.

Partner, Family Office Services

If you are fortunate to unexpectedly receive financial assets, this wealth windfall presents exciting opportunities.

An inheritance, stock market gain, lucrative contract, the sale of a business, or lottery win may present an important chance to accelerate your goals and dreams. Perhaps you want to share the wealth with family members, contribute to charity, build more wealth, or simply protect what you’ve received.

Making wise decisions is critical to realize your goals. Yet most recipients of sudden wealth are inexperienced in managing significant financial assets. How does this windfall impact your family? How should you invest the money? What are the legal and tax implications? How can you help others? How should you establish a family legacy? What’s the best way to give to charity? How do you grow and protect the funds?

Achieving financial goals and priorities requires thoughtful planning and execution. Yet too often, people make impulsive or uninformed decisions that sadly, lead to personal and family conflict and sometimes, financial failure.

This is why a family office can be an important conduit to realizing your dreams and those of your loved ones.

A family office serves as a protective ecosystem for a family’s vison, goals, and values. Just as each family is unique, so too is each family office. Ideally, the family office will include a team of advisors and specialists who provide coordinated, personalized and unbiased support to effectively manage an overall financial strategy in a family’s best interests. Depending upon a family’s needs and the capabilities of the particular family office, these professionals may address all or key areas such as : wealth management, accounting, tax preparation and tax planning, philanthropy and private foundations, retirement and estate planning, family education, and business transition.

If you quickly assume responsibility for managing substantial wealth, having the experienced, impartial perspective and support of a family office that is well-matched to your needs can be priceless. Typically, when you begin a working relationship with a family office, these professionals gain an understanding of your current situation and your dreams for your new wealth. Expect them to work with you and your family as you articulate a family vision, values, and goals, and then develop an aligned, integrated financial plan and roadmap.

Some family offices can also establish proper processes to monitor and report on your assets and provide you with independent oversight. As well, you may want the team to facilitate family communication and meetings related to strategies and decisions; provide administrative support; and offer expert, unbiased advice to grow, preserve, protect, or allocate your wealth according to your wishes. All of this promotes enlightened decision making and minimizes family surprises and conflict.

If you are the fortunate recipient of sudden wealth, consider the following steps to ensure you are making wise decisions to protect or build on your new assets.

  1. Take time to think and plan.
    Put the funds in a safe place while you consider your next steps. Don’t make any major decisions until you take time to consider your new circumstances. Think about the future you want for yourself and your loved ones.

  2. Determine what you need for your lifestyle goals and what is available for legacy goal.
    Generally, it’s advisable to keep your windfall as confidential as possible to avoid the expectations of extended family, friends, charities, and other interested parties. At the same time, it can be helpful to begin to consider when it will be appropriate to discuss the situation with children and other beneficiaries to help educate and prepare them for the future.

  3. Meet with experienced family office professionals to assess potential fit.
    Having a team of trusted advisors will help you make wise decisions to protect your long-term financial security. Interview a variety of family office providers to determine whether they can provide the support, value, and peace of mind that you want. You should be comfortable and confident with the people you would be working with and their values should complement yours.

Sudden wealth brings both opportunities and responsibilities. Be sure you have the sound advice and dependable guidance you need to make rewarding decisions for yourself and the ones you love.

To learn more about the steps to managing a wealth windfall and how a family office can help, contact Tina Di Vito, CPA, CA, CFP, TEP, FEA, Partner, Family Office Services, at 416.515.5071 or [email protected].

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