Focus on financial reality rather than lottery dreams
Alan Frisher, CDFA is a financial advisor and the owner of Sage Financial Management located at 6550 N. Wickham Rd. in Suntree. For more information, call 321-242-7526 (PLAN).
Have you ever daydreamed about winning the lottery? Or possibly inheriting $1 million — or more? What would you do if you won? Quit your job? Travel the world? Buy your dream car or vacation home? Allow me to be among the first to congratulate you on your lottery win or inheritance, but always remember that with money comes responsibility.
A windfall of money requires some forethought into how to best protect and grow the new-found gain. There are many questions that must be answered, including: How do taxes play a role with my winnings? Considering my age, how can I best make my money last? Should I pay off debt? Should I help others who are less fortunate than me?
If you are fortunate enough to win or inherit large sums of money, before you make any financial decisions, speak with three specific professionals — a financial advisor, a tax advisor and an estate planning attorney.
A triangle is the strongest geometric shape because each side counts on the other side for balance and power. These three professionals make up your financial triangle when it comes to protecting and growing your money. Working together, these professionals can help you with every financial concern you have, and educate you on concerns that you didn’t even know you had.
The financial advisor is often times the leader who recommends the other professionals on your team. This professional helps guide you by asking the question, “What is important to you?” and then he/she listens closely. Your financial advisor will discuss possible investments for short-term and long-term planning, will understand how much debt you are in and advise the best strategies to pay off that debt. Your financial advisor will inform you how best to save and protect your money, depending on your tolerance for risk, and will also help financially prepare you for future concerns such as disability or death. This professional will help you look toward your future by focusing on your present situation.
The role of a tax professional (possibly a CPA) is to be a consultant for good accounting practices and financial reporting, specifically with regard to tax savings and reducing costs (in business). Whether you like it or not, the government becomes your partner when you win or inherit large sums of money. A certain amount of taxes must be paid on the inheritance or lottery win. The government wants its share.
And finally, the estate planning attorney helps clients determine the specific distribution of their estate to beneficiaries by helping to establish documents such as wills, durable powers of attorney, medical surrogates, living wills, and a variety of different types of trusts, including charitable remainder trusts, if you are charitably inclined.
There is no one best way to handle a huge financial windfall, but with the guidance from the three professionals, you can effectively understand the way that is best for you.