Lately I have been introduced to people who have just come into a whole lot of money. Most times it’s game-changing kind of money. And there are a number of reasons why it’s happening. Some have small businesses which take off. Some have a company stock which went IPO. Some are stock options which became vested. Some are from life insurance proceeds or inheritances.
It’s understandable that these people have a HOLY CRAP moment. Followed by a period of WHAT COOL THINGS SHOULD I DO WITH THIS MONEY. Usually it becomes overwhelming, and a self-realization that they should seek help and get advice. This is often the best time for someone like myself to arrive on scene, and I am appreciative when people make these introductions for me.
Naturally things become more complex for these people, especially if your net worth tacked on a few more 000s. Tax planning, amongst other things, is crucial to the situation. And it will be important to use discipline when figuring things out. I am sure the latest Tesla or the 45-foot catamaran has always been on your radar, right? That should probably NOT be the first thing you do…hint hint.
Fortunately I’ve worked with clients in this position and together we’ve mapped it all out successfully. And unfortunately, I’ve also seen my share of people blow through money at astonishing rates. But here’s a few quick things I would encourage anyone to consider…right out of the gate:
- Increase your insurance coverage. Common sense says that the more money you have, the more you may be a target for a lawsuit. It would behoove you to increase your liability limits and also get an umbrella policy.
- Get the estate planning documents in order. Now more than ever you will need to plan on the “who-gets-what”. Make sure your accounts are titled correctly, and make sure you set up your plan so that everyone is clear where the money goes when you die. And if you are charitably inclined, you will probably want to involve a charity that you are passionate about. Don’t wait to get this in order.
- Lock in a great accountant (or two). They will be important to assist with business and personal planning, and figuring a way to most cost-effectively handle your money. Now is not the time to keep doing your own taxes….spend a few dollars to potentially save yourself a lot of dollars.
- Honor their legacy. This really pertains to money received as an inheritance. I think it’s important to remember where the money came from, so why not honor their legacy and hard work?! Perhaps give some to other family members in need, or to causes that the deceased cared about. At the very least, use intentionality with the inheritance money and use it like the person who gave it to you would be happy with the way you are spending (or saving) it!
Of course a good financial planner can help navigate these issues. Planners are adept at the financial aspects like investments and prioritizing where the money should go. They will also help you think about critical issues that you hadn’t thought of, as well as manage the emotions that come with it. They can also help tackle the unexpected situations, like how to handle the family members who appear out of the woodwork asking for money.
Whether you are an overnight millionaire, or just moved up a few notches on the “net worth” spectrum…your world is now different. Take it slow. Play it smart. Know who (and what) is important to you. Most importantly, surround yourself with the right people. Reach out to me and I’d be more than happy to provide some guidance.