Many events, both positive and negative, may result in a person suddenly having wealth that they were not expecting. On the positive side, one can hit the lottery, sell a business (hopefully this is something for which you plan), cash in a terrific investment, gain control of the funds in a trust, get a large signing bonus, or any number of events. However, there are also other events that are not so positive, but which also may result in wealth suddenly coming to you. These are things like divorce, death of a loved one, a legal settlement or any number of unexpected and/or unpleasant experiences.
In any of these, the level of emotion will vary for each person. It is precisely because we all struggle with the sometimes unrecognized emotional impact of such occurrences that we should take a step back and consider how we should proceed. Based on our experience when our clients, friends, and family have had to deal with these issues, we offer the following considerations.
1. First, do nothing that is not absolutely necessary
Of course, there are times when bills must be paid, etc., but one of the worst things that someone can do when they come into this new wealth is to be in a hurry to do anything that is not required. For example, when a spouse dies, and there are life insurance, investments, or other assets that come to you, it is tempting to jump into a financial or other relationship to fill the void that is now felt. Although this is certainly understandable, it is almost always inadvisable. Financially, put the assets into something that won’t hurt you while you gradually work to get your emotions and other matters sorted out. It sounds easy, but we recognize that it is not. However, we have found that just jumping into something while emotions are high almost never works out well.
2. Second, work with someone you can trust
We have done an article regarding this issue before; and working with some you can trust is definitely something that everyone should do. Sounds easy right? It is not. Sometimes there are family disagreements, or one of the many predatory snakes (yes, I despise these people) out there will try to play on your temporary vulnerability to take hold of you and/or your assets. We suggest that you instead work with an adviser and/or family member whom you know has been helpful to you and/or your family and friends in the past; or a firm which is well known and highly respected. This can be a law firm, financial planner, investment person, brother, sister, or whomever you feel is trustworthy. One other thing regarding this: if you want to pursue a certain path and the adviser suggests another way to go that shows they are trying to protect you, that is probably a good thing. However, you should always seek a second opinion if the firm or person is not someone that has been well known to you.
3. Third, see item #1 above
Acting quickly when we are emotionally charged when we are teenagers usually only results in a fight with friend or being grounded by our parents. When the sudden wealth situation occurs in adulthood, doing anything quickly while we are very excited about our new wealth, or very sad or angry over a recent event, may result in a tragic loss of financial stability for life
We're here to help. Please call us if you wish to discuss.