An unexpected bonanza, whether from an inheritance, lottery winnings or a lucrative business deal, is undeniably life-changing. You may feel like running out and celebrating with a luxury purchase like an expensive car.
A celebration may be warranted, but remember to safeguard your bounty and keep an eye on your spending. New wealth can disappear quickly, but sound estate planning helps protect your legacy and family for generations.
Review your estate plan (or create one)
If you already have an estate plan, this is a good time for an evaluation. Assess how the windfall changes your current circumstances, future goals and asset distribution preferences. Make updates that accurately reflect your intentions regarding family, philanthropy and investments.
If you do not have an estate plan, creating one as soon as possible can help you preserve and distribute your wealth per your preferences.
Consider potential tax impacts
A sudden financial influx can pose significant tax implications. Work with someone who can help you understand how the windfall affects your income tax and gift tax liabilities. California does not impose estate taxes, but federal taxes may apply.
A well-structured estate plan can go a long way in helping to mitigate the tax burdens that often accompany a windfall.
Explore the power of trusts
Trusts are powerful tools to safeguard and manage your new wealth effectively. Consider options like revocable trusts for flexibility, irrevocable trusts for asset protection and charitable trusts to align with philanthropic goals and provide tax benefits.
Legal guidance from someone knowledgeable about California estate planning can help you build a secure estate plan that protects your wealth.
