Managing a Windfall

One signed a multimillion-dollar contract; another bought a lucky lottery ticket; a third sold property rights. Well look at what they did with their sudden gains and what you should do with yours.

to look at the balances but thinks they may have about $1,500, combined, “and that’s being generous,” she admits.

“That money was supposed to be for emergencies,” Whitsitt says. “But I had Internet accounts and with one of them, if you needed the money, it could be returned to you within 24 hours. That was a good thing and a bad thing because the money was so very accessible. If I had to do it all over again, I would’ve invested the money in something I couldn’t touch right away.”

For anyone coming into a huge windfall, Simmons recommends being conservative. “If you have it, then there’s no need to splurge. It’s all about making good choices and good decisions. That’s the only way to success, financially and in life.”

What to do — and to avoid — if you get a financial windfall:
Get help. Money managers, certified public accountants, certified financial planners, attorneys, and financial psychotherapists can all offer invaluable assistance to help you manage your windfall properly. Select a team of financial and legal consultants, or a firm with a broad-based approach that you can trust. But even as you assemble a team, recognize that you’re still the captain. “Surrounding yourself with a team of knowledgeable consultants is not grounds for letting them take control of your financial future,” says Harold Hadnott of Merrill Lynch’s Private Banking and Investment Group in San Francisco. Be involved in all aspects of decision making.

Set up a system to deal with requests for money. Consider creating a set of guidelines that dictates the way in which financial requests will be handled. Guidelines provide structure for private and public philanthropy, and they also help manage the expectations of those making requests, Hadnott says. Having guidelines in place helps reduce unwanted solicitations and conflict. Additionally, you can “remove the difficult burden of saying ‘no’ by delegating that responsibility to an attorney or accountant,” Hadnott suggests.

Think about giving in a structured way. Dianna Smiley, vice president of the National Center for Family Philanthropy in Washington, D.C., says there are three primary ways you might direct your giving in an organized manner.
You can give through a “donor-advised fund,” available at major fund companies or via some 700-plus community organizations throughout the country. Donor-advised funds typically require gifts of $10,000 or more. If you give very large gifts, of more than $5 million or so, Smiley says it may be time to consider whether it’s worth it, from an administrative and cost standpoint, to establish a family or private foundation. Lastly, you can donate directly to an organization, establish a scholarship, or create an endowment for a cause you support. For more information on philanthropic giving, contact the National Center for Black Philanthropy (www.ncfbp.net) or the Twenty-first Century Foundation (www.21cf.org).

Plan before you invest. “The first thing you need to do is plan. That should be your motto,” says LeCount Davis, CFP and the executive principal of LRD Management Group. “You
may not just have an income tax problem; you may also have

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