Sudden Wealth Requires Thoughtful Planning Too

December 7, 2017

Being the primary medium of exchange for a civilized culture, money can exert strange and sometimes complex influences on people, causing them to exhibit unexpected changes in behavior and attitudes.  Nowhere is this more evident than in the case of so-called “sudden wealth” due to inheritance, a large elevation in work income, or in rare circumstances, being the winner in a large lottery.  And it’s not only the lucky recipient that’s affected; often it’s the people around the recipient as well.

All of this came to mind last week when a client called to discuss a predicament she was facing due to a rather large inheritance.  In this, our client’s wealthy father passed away recently and bequeathed large annual sums to her that will allow her to enjoy a comfortable lifestyle for the rest of her days; a lifestyle that will markedly improve upon her currently modest circumstances.

Her new issue is with certain friends and family members, especially with family members who weren’t included in the inheritance and feel somewhat short-changed.  These individuals are treating her differently as well as suggesting “sharing” would be a moral road she should take.  And others in her life have approached her for financial assistance for various causes, charities, etc., apparently feeling my client has the means to also share her good fortune with many others and the world-at-large.

Sudden wealth can solve many financial problems, such as debt repayment, bettering one’s lifestyle and spending choices, realizing life-long dreams and even affording the means to help others with their goals, such as sending children to good colleges or relieving parents or others of their financial burdens.  It can also bring unwanted and unlooked-for issues such as relationship problems with those who are not as well-off, losing a sense of purpose or direction in day-to-day life, and new financial anxiety of how to preserve this situation for the future in a sensible manner.  It also brings new choices perhaps about how and whether to share this wealth, either with those close to them or for favorite causes and charities.

It may sound simplistic, but a sudden, unexpected windfall requires the same type (or more) of forethought, careful consideration and planning expected for those in more modest circumstances.  For those who don’t (young superstars in entertainment and sports come to mind), even large amounts of money can be spent unmindfully or given away unchecked until there’s nothing left.  There’s nothing wrong with helping others and charitable, but do so in a disciplined and mindful way.

It is estimated that hundreds of billions of dollars of inherited money will be passing from the current elderly generation to the so-called Baby Boomer generation over the next decade or so.  If you are on the lucky end of this transfer trend, be sure to receive your windfall with a sensible and thoughtful plan in mind.  If anything, most recipients will want their new wealth to go toward good (and multiple) uses.  Having a plan and goals in place will help ensure this occurs in a sensible and prudent manner.