estate tax proble
ms or even gift tax issues,” says Davis, who is also the chairman of the board of the Association of African American Financial Advisors in Bethesda, Maryland.
One strategy for windfall recipients, Davis adds, is to put a portion of the money into U.S. Treasuries. “[Doing so] will eliminate federal and state taxes, so your effective return is higher than the nominal return of, say, 4% that might be quoted for those Treasury securities.”
Give yourself time to sort things through. Bradley suggests that you wait before making major decisions. She adds that there are three stages people go through who achieve sudden wealth. The first is “the ending of life as it was.” Whether or not you want it to be the case, the reality is that your circumstances have now drastically changed. The second phase is the “passage” to whatever new life and new sense of normality you will achieve. Big emotional changes can happen in this phase, Bradley says. One day, you might regret whatâ€™s lost to you (privacy, relationships, etc.), and the next, you might be excited about what the future holds. Confusion is also common at this stage, since youâ€™re still adjusting to your new circumstances. The last phase, Bradley says, is the “emergence” of your new life, in whatever form it takes.