The Powerball lottery jackpot reached a staggering number last month, topping out at $758.7 million, amounting to the second largest haul in the contest’s history. The odds of winning were one in 292.2 million. Obviously, with numbers like that, the chances of scoring the jackpot were more than slim. But plenty of average Americans receive windfalls of varying amounts every day, such as from inheritances or lawsuit settlements. This sudden wealth, while fortuitous, can also be complicated and stressful in reality, impacting relationships, altering estate plans, and creating other hoops to jump through. How do you handle it?
An oft-referenced problem with sudden wealth is recipients don’t know what to do with the money, resulting in mismanagement. Sadly, research backs this up, as a 2009 Vanderbilt Law School study revealed bankruptcy to be a common conclusion to lottery success stories. The winnings didn’t even need to be the big prize — awards between $50,000 and $150,000 did not aid those in debt, merely delaying bankruptcy filings. Clearly, no amount of money can make up for bad financial habits.
Even if you aren’t in debt, a sudden surplus of funds can be overwhelming. Depending on your financial situation, a small but significant amount can represent unexpected options for the future, causing so-called “analysis paralysis”. In fact, Forbes reports that the most common first response to a windfall is stress, which compromises the ability to make sound decisions.
The crucial first step is to simply take a breath. The second is to seek counsel.
Remember that before any of that money can be put to use, taxes may have to be paid. Although most personal injury settlements and inheritance are not subject to tax, there are other types of proceeds such as business proceeds and real estate transactions that may. Thus, it is important so seek knowledgeable professionals to guide you through the process.
An additional concern is the increased attention and pressure from family, friends, salespeople, charities, and investment firms. This is another way a lawyer can act as a much-needed intermediary. Rather than bowing to pressure and doling out gifts, investments, and donations whenever requested, your attorney can play the “bad guy”, taking the heat from those you’ve turned down and advising you on the best options for you.
An attorney hired to help you adjust has only one priority: your future. At Bellah Perez, PLLC, our attorneys are experienced in tax law, estate planning, and debt relief, all of which play a crucial part in shaping your future. We strategize the best way to pay off debt, protect your new assets, and update your estate plan. Whether the dollar amount is big or small, our lawyers run interference for you so you can enjoy your unexpected change in fortune.
Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.