What to do if you receive a financial windfall?

It is a common assumption that if you receive a very large windfall such as that from the sale of a business, property, land or winning the lottery, all your dreams will come through. The reality is, it also brings stresses and strains to you and your family, that, you could never have imagined. In response, I thought I would share my experiences of working with very successful families. What helped them to prosper and steer their family safely to this promised land of wealth and happinessΩ?

A large amount of money can be incredibly impowering, allowing you to achieve all those financial dreams that were buried deep inside. In practice, it can become a huge burden, having to deal with a long list of demands from family members, hard luck letters, charities begging letters, the community expectations and financial services “lottery chasers” hoping to make their own fortune from your new-found wealth.

While this is a very new experience to you and yes there are a slew of people wanting to profit from your situation, there are strategies available to help you prosper. Below are just a few practical steps for you to take.

Step 1: Stay calm and do nothing

 It may feel from the chatter around you that you need to do lot of things immediately. The fact is you are rich, so you do not have to do anything! Give yourself time and space. Be strong in staying no to those that wish to rush you. As the old phrase advises “act in haste regret in leisure”.

Initially, stay away from the band wagon of friends/cousins with business ideas, bankers, lawyers, accountants, tax advisers, investment advisers, estate agents and any one calling themselves “trusted advisers”. They will sow confusion in your mind by either trying to stress or flatter you into their web of control. Let’s face it, they have been doing this a long time and know what buttons to press, to get you to sign up.

Step 2: Think long term

Assuming you have more money than you need to live on, you can think about the longer-term needs of you, your family and grandchildren. When families begin to think about the longer-term interests, they begin to make better decisions. They realise that there is no need to rush decisions.

Step 3 Get the family together

Get the family together for a chat to discuss the big picture. What do you want to achieve with your money? E.g. provide for education, housing, lifestyle etc. A family who works together is stronger and it reduces disputes. Who attends this gathering depends on your family dynamics. Pick a location that allows you to have an open and frank conversation, often it would be a day in a hotel, or the kitchen is fine once you will not be disturbed.

Ideally you will come away with a consensus on what is important to you as a family, high level action plan and ground rules of who will get what and when.

The outcome may be that some members want to go their own way and that may be the right option, but it requires a measured approach. An independent mediator may help in this situation. Also, there are many ways you can cooperate with each other, even if, you do not share the management of your financial affairs.

Step 4 Get organised

Now it is time to implement the families long term plans. If there is only one decision maker, they can take the lead. If there is more than one decision maker, appoint at least 3 members to a committee/group (I call the leaders group).  Why at least 3? If only 2 members, there is no way of resolving a deadlock in decisions.

This group leads the family in implementing the practical steps of appointing tax advisers/accountants/ investment advisers, lawyers to mention a few. This can be a difficult process. How to decipher which glossy brochure, glossy office or glossy “trusted adviser” will look after the interest of your family and not theirs?

Over many years I have developed a comprehensive list of 45 questions that I ask any potential adviser/investment broker/accountant/lawyer to determine their suitability for the work at hand.  By asking consistent question, with answers in writing, it will help you make an informed decision. If you would like a copy of this questionnaire, please feel free to contact me on the below, I am happy to share.

Use at least 2 advisers from any profession i.e. 2 tax advisers. As this will reduces the risk of receiving poor advice and you also have a number of voices helping you to make the right decisions for your family.

Step 5: Keep communicating

Regular 2-way communication between the leader(s) group and the wider family keeps everybody involved and empowered to contribute their views. This will minimse the stress, confusion and anger that this situation can breed. Having a meeting at least once a year is important. Initially, it may need to be more regular, as a lot may be happening in the first few years.  Who attends and what information is shared is dependent on your family situation.

Going forward with confidence

While a windfall any time is a blessing, it can feel like a curse when there is family rancor, stressful decisions and very expensive mistake caused by expensive “trusted advisers”. A scenario I have seen many times. If you do follow some of the simple steps above it can make a real difference to your family’s happiness and wealth.

Author; Frank Mulcahy, is the principal at Trinity Financial Management, he provides a specialised service to families, to ensure they win the money game (and not their advisers) and puts their interests first at all times.

If you would like to have a chat, contact me on 01 908 1236 or email me on  frank@trinityfinancial.ie. Additional information can be found on www.trinityfinancial.ie

This article is provided on the strict understanding that it is for the reader’s general consideration only. Accordingly, no action must be taken or refrained from based on its contests alone.

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