LUTZ BUSINESS INSIGHTS
What to Do With a Financial Windfall
JUSTIN VOSSEN, INVESTMENT ADVISER & PRINCIPAL
A financial windfall can come at different times from different places. Some are emotional and unexpected like the death of a loved one, and others may be planned like the sale of a business. Whatever the case, it may bring about a certain level of excitement and also a certain level of anxiety. There are sometimes more questions than answers in these situations. It is important to put a plan in place to guide you through the process.
Don’t do anything but find a safe and liquid place to park any proceeds for the near term. If your windfall is public, you can bet many will seek you out with their own opinions of what you should “do” with the proceeds. Many of these people will just happen to know “the best” thing for you to do with your money after you have earned it. Be careful. Some of these suggestions, such as annuities and other investments, will come with steep redemption penalties if you find later that it wasn’t “the best” option for your situation.
Instead, be pragmatic about the funds in the short-term. Keep it in an insured account at a bank, insured with multiple banks, a Treasury bill, repurchase agreement, or short-term high grade money market fund. Keep it very liquid, safe and close at hand. There is plenty of time to plan what to do with it!
Assemble a team of trusted professionals who have experience working with clients that have had similar windfalls. Depending on the size of your windfall, it will be important to work with multiple professionals. You may need an estate attorney, a CPA and a certified financial planner to help with the transition.
The attorney should specialize in estates and the CPA should bring extensive tax background to the table. The certified financial planner should have experience with this and should be the one to knit all the pieces together for you. These advisors shouldn’t sell you anything, rather work as a team to address your personal issues and help you find solutions.
Some things will need to be addressed on a timely basis. Working with your advisors quickly will give you some opportunities for some time-sensitive tax minimization strategies, estate and financial planning ideas, and other items that may need to occur within the calendar year of the transaction. If you know this windfall will be coming, you should meet with your team ahead of time. This will allow you to strategize your approach and may mean more money in your pocket. They should give you first a short-term plan to address any time sensitive issues. After that, you can work on your longer-term plan.
With a windfall of wealth comes responsibility, as well as the opportunity to help others. This responsibility begins with you and your family, but extends to your friends and community. You need to think about if and who you are going to share it with and plan in advance.
You are entitled to do what you want with your wealth; however, others may realize your good fortune and potentially want a piece of it. Whether you share it or not is up to you. Having a plan in advance on who you share it with and when will provide a framework for you to communicate with others. You can be proactive with your sharing instead of reactive when somebody approaches you asking for a loan, donation, investment or even a handout. To put it simply, you are giving yourself the ability to say “no” when approached. A plan will help you keep and share the wealth on your terms, not at the whim of others.
Depending on the size of the windfall, you may find yourself financially independent. If you are, it’s important to understand how much or how little risk you need to take to maintain the lifestyle you desire. This is crucial as unintentionally taking too much risk in the markets could jeopardize your financial independence.
Sometimes windfalls are the result of a calculated risk that one has taken, like owning a successful business. It’s important to understand your good fortune and protect it, not take the same risk again and lose it. Addressing your options and examining your need or desire for additional risk is important. Your team should work with you to mitigate any risk as you need to in order to maintain your financial independence.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.
ABOUT THE AUTHOR
JUSTIN VOSSEN, CFP®, NAPFA + INVESTMENT ADVISER, PRINCIPAL
Justin Vossen is an Investment Adviser and Principal at Lutz Financial. With 21+ years of relevant experience, he specializes in providing wealth management and financial planning services for high net-worth families, business owners in transition, endowments and foundations. He lives in Omaha, NE, with his wife Nicole, and children Max and Kate.
AREAS OF FOCUS
- Investment Advisory Services
- Comprehensive Financial Planning
- Business Owner Planning & Succession
- High Net Worth Families
AFFILIATIONS AND CREDENTIALS
- CERTIFIED FINANCIAL PLANNER™
- National Association of Personal Financial Advisors, Member
- Financial Planning Association, Member
- BSBA in Economics and Finance, Creighton University, Omaha, NE
- St. Augustine Indian Mission, Board Member
- Nebraska Elementary and Secondary School Finance Authority, Board Member
- St. Patrick's Church, Trustee
- Mount Michael Booster Club Board
- Lutz Gives Back, Committee Chair
- March of Dimes Nebraska, Past Board Member
- A 100-Year Bet Gone Bad
- Am I Ready to Retire? Finding Your Sweet Spot
- 5 Retirement Strategies for Small Business Owners
- Outsmarting the Ivy League?
- An Investor's Year-End Wrap Up & Tax Prep
- Nobody Knows Anything
- Add "Brexit" to the Long List of Uncertainty
- Financial Planning for College Grads
- Fight or Flight - Lesson Learned
- Social Security: The New Rules
- Putting Volatility in Context
- The Asian and European Fronts
- Bubble Looming or a Bubble Popped
- Re-Emerging Markets?
- A Market Perspective
- Timing is Not Everything
- "Yellen" at the Fed
- Mind What Matters...Focus Efforts On What You Can Control
- What to do With a Financial Windfall
- Love Indexes - Hate the Indexes
- Do I Own a Market?
- A Practical Primer On Volatility
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.
13616 California Street, Suite 200
Omaha, NE 68154
747 N Burlington Avenue, Suite 401
Hastings, NE 68901