This month, Americans were once again consumed by a Mega Millions jackpot as its value continued to rise to become the second largest in history. Some lucky South Carolina lottery player is now $1.5 billion richer. Even if it’s being split among a dozen co-workers, that’s a considerable windfall.
While most of us aren’t going to find anywhere near that amount of money falling in our laps, a lucky weekend at a casino or an unexpected inheritance can leave people wealthier than they ever imagined and with some important decisions to make.
Financial experts recommend that people who get an unexpected windfall hold of on these decisions until they consult with financial, tax and legal professionals. If you’ve suddenly got more money than you ever expected to have, regardless of what that amount is, it’s easy to become overwhelmed by all the options.
One thing you definitely want to do is hang on to as much of it as you can. That means paying as little as legally possible in taxes. Paying off debts is generally a good step. So is making some wise investments. It’s fine to splurge a little on yourself and others. Many people give a share of their windfall to charities and other organizations they support.
If you don’t have an estate plan, this is the time to create one. If you already have one, you’ll likely need to update it. Estate plans should always be updated, or at least reviewed, whenever you have a significant life event. A sudden influx of money would qualify as one.
Depending on the amount of money you received, your estate plan could change considerably. Perhaps you were dividing your assets among a few close heirs. Now you may be able to leave a considerable amount to charities as well. Even if you’re giving them some money immediately, you might feel more comfortable keeping the bulk of it to live on.
If your windfall means leaving considerably more than you originally planned to loved ones, it’s important to prepare them for their own potential windfalls. You may feel more comfortable setting up trusts and having trustees manage the distributions — particularly if they’re intended for family members who may not handle large sums of money wisely. Your California estate planning attorney can provide valuable assistance as you draft or revise your estate plan.