Mastering a significant wealth event

Whether sudden or planned, the right steps can help you take charge of your newfound assets.

A significant wealth event occurs when liquid assets under your control increase in a meaningful way. These events can be planned, like with the sale of something valuable, or unplanned, like a sudden windfall from an inheritance. Whatever the source may be, significant wealth events come with changes.

If managing significant wealth is a new experience for you, then it may alter your self-perception. Friends and family members may begin to perceive you differently as well. It’s important to ask the right questions and work closely with a financial advisor to ensure you receive the right guidance to successfully navigate the opportunities and potential challenges that wealth can introduce. There are many things, both planned and unplanned, that can lead to a significant wealth event in your financial life.

Significant wealth can result from:

Each wealth event is unique, from your personal financial situation to the amount of the assets acquired and the circumstances that led you to receive it. There are also emotional factors to consider. A significant wealth event can often inspire compulsion, whether in the form of excessive spending or reckless investing without a greater plan in place. But there are things you can do to avoid the common pitfalls of a significant wealth event. No matter where your wealth comes from you should be ready to take steps that will ensure it works for you.

Significant wealth events are happening with women at a higher rate than ever before amid the largest transfer of intergenerational wealth in history. The financial services industry is already adapting to a landscape where women have control of more wealth.

Before

Because significant wealth events can be the result of your good planning paying off, it’s possible to prepare before the event. This is the time to assemble your financial team, address potential tax consequences and event timing, establish a cash flow budget and consider pre-transaction tax mitigation strategies. All of these things will help you ensure that the wealth you receive is preserved and that you are setting yourself up to make it last.

During

In the midst of a significant wealth event, especially an unexpected one, avoid large expenditures based on impulse, work with your financial advisor to determine secure cash holding structure and finalize a long-term wealth management plan. These steps will help you become a good steward for your wealth and help you stay savvy during this period of changes to your financial life.

After

Once things start to settle down following a significant wealth event, you should implement your plan and review its progress with the help of your financial advisor. This can range from estate and tax planning to investment management and the potential risks associated with significant wealth. These risks, including fraud and frivolous lawsuits, may be unfamiliar but can harm your wealth if you aren’t prepared. Finally, reflect on and outline your financial legacy and the impact you would like to have on others, then incorporate steps into your long-term financial plan that align with these goals.

Throughout your wealth event, there are several key strategies you can employ to help manage your wealth effectively and make the most of your chosen lifestyle.

Establish a “waiting period” during which you make no large purchases or allocations, helping you prevent ill-considered spending.

Monitor your tax strategies with the help of a qualified tax professional. They can provide you with guidance on tax planning strategies catered to your individual situation.

Prioritize your privacy to safeguard your personal activities and life events. Money often attracts attention, and discretion can be paramount for those not used to having it.

No matter where your wealth comes from or when, it’s important to have a plan in place. Start by identifying all potential sources of wealth in your life, and then take the necessary steps to prepare for those possibilities. If you unexpectedly come into wealth, it’s not too late to create a plan for that, too. With the guidance of a trusted financial advisor, you can preserve your wealth, cherish your lifestyle and cement your legacy.

Next steps:

• Evaluate possible wealth-generating sources in your life.
• Prepare for unexpected wealth events to ensure you’re ready.
• Make a plan for any anticipated wealth.
• Talk to your advisor to discuss proactive measures for wealth preparation.