Handling a financial windfall

Your new money may be from an inheritance, lottery winnings, long-term financial planning or finally closing that big deal. But with the perks of a financial windfall comes greater financial responsibility. Here are some tips to help you tackle it like a pro.

1. Build a team

Chances are you’ll need to revise your financial and legacy plans with your wealth manager, accountant, and tax lawyer.

2. Determine your wealth involvement

When it comes to your wealth, what kind of client are you—strategic or tactical? Do you want to be involved on a big-picture level, or make day-to-day portfolio decisions yourself? Neither is right or wrong, but if you’re leaning toward the latter, be honest with yourself about your capabilities: The skills of a successful person aren’t always those of a successful money manager.

3. Pay off debt, then invest

Making your money work for you is all well and good but don’t do it at the expense of paying off car loans or the mortgages on your home or cottage. This is especially important advice for Type-A achievers, who can sometimes value the game of investing over the often smarter (but mundane) move of paying off debt.

4. Spread the wealth

After the windfall, the focus should be on keeping what you have, not striking it rich. That means diversification and conservative growth.

5. Assess and control spending

A lump sum windfall, no matter how large, shouldn’t be treated as if it’s a continuing high income. Rather than allocating more money to riskier investments, it’s better to understand your spending— taking into account it may be higher than before—and control it before you burn through your nest egg.

6. Explore income-splitting opportunities

Will this windfall be your primary source of income? If so, and you haven’t already, take advantage of income splitting. It’s often possible to use a corporation to split investment income with adult children and your spouse in certain situations.

7. Learn to say no

In the Internet age, it’s hard to come into a financial windfall quietly. Unfortunately for you, this means unsolicited calls from friends, family, and charities for seed money, loans and gifts. Learning to say no can prevent a lot of stress and hassles.

8. Revisit and reassess

A large windfall is a one-time event. Wealth and estate management isn’t. So, revisit your financial plans and life decisions on a semi-regular basis to assess what’s working, and what’s not. While the exact schedule for such reassessment should be based on personal circumstances, most professionals suggest 24 months as a good initial target.