What To Do If You Receive a Large Sum of Money

With the odds of winning the lottery jackpot being 1 in 292 million, it’s not likely that most people will need to worry about what to do with a jackpot win. However, it is possible that you will inherit a significant amount of money (or an asset or investment) during your lifetime. Before dreaming of a new sports car or the lifestyles of the rich and famous, consider these strategies to help you manage your windfall: 

1 – Share your news with as few people as possible. 

As many lottery winners have found, speaking openly about a large inflow of money may bring unwanted attention from salespeople, scammers, relatives, and friends. Within families, those who didn’t inherit money may contest the inheritance of those who did. If you do share your news with a trusted loved one, ask them to keep it to themselves. 

2 – Don’t rush to spend the money. 

Many people make emotional decisions after coming into a large sum. They may hear from family members or friends requesting loans or gifts; they may also get the itch to spend a little – or a lot – on themselves. If you are inheriting money from a loved one who passed away, you may also be grieving. Wait to make any spending decisions until you’ve had an opportunity to process the situation. Depending on your benefactor’s estate plan, you may inherit funds but may not receive them right away. Don’t be tempted to spend what you don’t have. 

3 – Ask yourself how having the money fits in with your financial and life goals. 

If your ideal future includes starting a business, retiring early, or making a significant gift to a favorite charity, you may now be in a position to act sooner than you originally planned. If you’re like most people, however, you may have multiple goals, including short-term ones like taking a vacation and longer-term objectives like paying off your mortgage or putting a grandchild through college. Spend some time prioritizing your goals to understand how you might balance your long-term and short-term desires with the things you really need. 

4 – Consider the tax implications. 

Just as the recent Mega Millions winner (or winners, if they pooled their funds to buy the ticket) needs to decide how to manage the tax burden that comes with winning a large prize, you may need to make tax-related decisions depending on the nature of the assets inherited and your individual circumstances. Your tax bracket, who you inherited the money from, and the amount are among the many factors that could affect how much and when you’ll owe taxes. Consult a tax professional immediately to better understand the tax implications of your inheritance and plan for the future. 

5 – Get advice from a professional. 

In addition to getting advice on tax planning, you may also have questions on how to invest your inheritance. You will likely also need to update your estate plan if you inherit a large amount of money. If you already work with a financial advisor, enlist that person’s help and ask for recommendations. Some firms, like Savant, have teams of tax and estate planning professionals who work in tandem with advisors to help provide clients with a holistic experience and appropriate resources if needed. 

Coming into money (or an asset worth a significant sum) can be beneficial, but it can quickly become a burden if handled improperly. If you receive a large cash inheritance, park it somewhere safe – like a federally insured bank account – and consider consulting a fiduciary financial professional who may help you evaluate your options, consider your goals, and create a plan based on your circumstances. 

Common Mistakes to Avoid When Receiving a Large Sum of Money 

When thinking about what to do with a large sum of money or how to manage a financial windfall, it is easy to make decisions that can have long-term consequences. One common mistake is spending too quickly before fully understanding how the money fits into your financial goals. 

Another mistake is failing to plan for taxes, which can significantly reduce the amount you keep. Many people also underestimate the importance of professional guidance, especially when considering what to do after inheriting money or handling a lump sum of money for the first time. Taking the time to avoid these common missteps can help you protect and grow your wealth more effectively. 

Why Work with Savant Wealth Management When Managing a Financial Windfall 

Managing a financial windfall can be complex, especially when you are making decisions that may impact your long-term financial future. At Savant, our team provides guidance that supports lump sum financial planning and aligns each decision with your overall goals. 

From tax planning to investment strategy and estate considerations, our advisors take a comprehensive approach to help you move forward with clarity. Whether you are navigating a new inheritance or planning your next steps, having a team in place may help you evaluate available options and coordinate planning decisions. 

Schedule an introductory call today with a Savant financial advisor to discuss your financial planning needs. 

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment or tax advice from Savant. Please consult your investment or tax professional regarding your unique situation.