I Came into a Large Sum of Money…Now What?

By Hightower Westchester on August 29, 2018

On your way home from work one night you decide to stop for some gas and you figure why not buy a few lottery tickets, and a couple of days later you check the numbers and you WON … what do you do?

Or have you ever played Monopoly and you land on Chance and you get the card “Inherit $100 from your Uncle”? What would you do?

Well the chances of winning the lottery are about 1 in well, a lot.  You probably have better odds of getting struck by lightning.  But inheriting money, now those odds are pretty good. It’s estimated that in the next 30-40 years, approximately $30 trillion dollars will be passed between the generations[1]. Unlike in the game Monopoly, the chance of your inheritance coming from your long-lost Aunt Betty are pretty slim, but the likelihood of inheriting money from people you actually know, like your parents or grandparents is pretty high.  It’s estimated that the average inheritance is around $177,000[2]. While that amount is not life changing, remember that this is the average, so while there will be many small inheritances, there will also be many who inherit hundreds of thousands, if not millions of dollars.

Whether its winning the lottery or inheriting a large sum of money, it’s best to take some time to think about the steps you should take and the discussions you should have before doing anything.  Coming into a windfall of money, no matter its source, requires you to pull together a team. This team should consist of a CPA, Attorney and Wealth Advisor. The more time you take to plan the better the execution will be.

Receiving a large sum of money is akin to building a house. You don’t just show up one day with a bulldozer and start digging and then start construction with no idea how deep to dig or where the first beam goes? You spend a lot of time meeting with an architect and a builder to figure out what you want and what will work with the piece of property you have to build your dream house on.  Receiving an unexpected sum of money works the same way.  You should spend a lot of time meeting with your team of experts to think about your needs and wants and come up with a solid plan.

To truly have a comprehensive plan, you should be sure to consider the tax and legal implications of getting this money.  Are you prepared? We’ve all heard stories about people winning outrageous sums of money playing the lottery and then filing for bankruptcy because they spent it all, and even worse, may even owe the IRS because they didn’t factor in the taxes they had to pay on the winnings.  These people didn’t take the time to plan and they didn’t think longer term about the impact this money would have on their life. They weren’t prepared, they got overwhelmed by their new-found wealth, and did not know who to turn to or who to trust.

Whether you come into a large sum of money quickly, because you won the lottery, or you’ve known it was going to happen for a little while because of an inheritance, you still have to be smart about how you handle it.  Remember, no one plans to fail, but you can always fail to plan.

Give us a call.  We’d love to talk to you about this and share best practices around steps to take to protect, and more importantly, enjoy your new wealth.

Peter Lang – Managing Director – HighTower Westchester

914-825-8631 – plang@hightoweradvisors.com

[1] Sigalos, M. (2018, July 10). $30 trillion is about to change hands in the US. Retrieved from https://www.cnbc.com/2018/06/28/wealth-transfer-baby-boomers-estate-heir-inheritance.html

[2] Average Inheritance: How Much Are Retirees Leaving to Heirs? (2017, May 22) Retrieved from https://www.newretirement.com/retirement/average-inheritance-how-much-are-retirees-leaving-to-heirs/