Managing a Windfall
Managing a windfall can be a blessing and a curse. It may be a blessing from the standpoint that you have received significant assets that will help you and your family. Receiving the windfall may be a curse in regards to the time and effort you will have to put into managing it.
We are currently in the midst of one of the greatest shifts in wealth from the Baby Boomers to the next generation. There will be an estimated $30 trillion in assets transferred between these generations, according to Accenture. Although that number is huge, the reality is that 70% of intergenerational wealth transfers will fail by the time they reach the second generation, according to a report presented by The Williams Group. Work will need to be done by the current generation in order to raise their level of success in maintaining the family wealth.
In addition to the generational wealth transfer we are currently experiencing, you could also be the recipient of a windfall through a business that takes off or even winning the lottery (I would not count on the lottery as a viable strategy). All in all, no matter how you receive your windfall many of the steps you should take are the same.
The first item on your to-do list should be hiring an advisor that can assemble a team for you and walk you through the steps and the process to manage this windfall. The type of money we are discussing in the framework of this article requires a number of key people including legal, tax, risk management and investment professionals-just to name a few. It is important that one of the advisors you work with take the lead, organize the team and keep everyone on the same page as you work to manage the new found wealth. The last thing you want to do is to collect the windfall and then lose it through poor management.
Once you have your advisory team in place and your designated quarterback, it is important to work with them and devise a plan. Do not rush this part as it is one of the most important steps you will ever take. The plan will be a roadmap to ensure you are receiving, spending, protecting, and handling your money in the best way possible. Building this plan and sticking with it over time will give you the best possible outcome for assuring these monies stay with you and your family for generations to come. Making a few wrong moves, simply deviating from the plan, could add you to the statistics mentioned above.
This windfall, in most cases, is more money that you have ever had or managed on your own. There is tremendous responsibility in making sure that it lasts. Working with an advisor and the proper team will certainly add to your success. Life is not static, markets are not either, and it is critical to revisit your plan on an annual basis. Each area of your financial life will want to be reviewed and discussed with your primary advisor. Adjustments may be needed along the way and that is normal. You should not equate adjustments with failure but simply a recalibration to ensure your windfall continues.
In addition to having the right advisory team, it is also important to educate the next generation along the way to help solidify your success. Ideally you want the next generation to have a full understanding of your wealth and your values. We often see that the next generation does not have the same principles when it comes to their family money as the previous generation did. This is often due to the fact that they have been sheltered and not brought into the “inner” circle. The next generation needs to see, understand, become acquainted with and learn how to work with the family advisors in order to raise the level of success for the next generation and those that will come after.
The success of handling a windfall and having it last for many generations lies in the families ability to align themselves with the proper advisor and team while educating the next generation on what this money means and how it will be best kept and used to help generations to come meet their financial goals. There is a tremendous responsibility when receiving a windfall and it may be a blessing to those that have received it. Go slowly, develop a plan, follow the plan, and educate the generations to follow in order to avoid the windfall being a curse and causing you to become a negative statistic.
We would be happy to speak with you or someone you know regarding a potential windfall. You cannot start planning early enough and why not now. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.