EP Wealth Vice President, Advisor, David DeVita, CFA, CFP®, CIPM®, CEPA, shares how to approach a financial windfall with clarity, from managing the emotional impact to tax strategies and long-term planning.
Coming into a significant amount of money can create opportunities you may never have had before. It can also create pressure to start making decisions immediately.
My first piece of advice is usually simple: go slow.
That is especially important when the windfall wasn’t something you had already planned for. An inheritance may follow the loss of someone close to you. Selling a business may mean closing a chapter that consumed decades of your life. A lottery win or unexpected liquidity event can change your circumstances almost overnight.
In those moments, there can be pressure—from yourself and from other people—to invest the money, give some away, upgrade your lifestyle, or solve every financial question at once.
You don’t necessarily have to do any of those things immediately. Give yourself some space to process what happened and determine what you actually want the money to do.
A few principles I encourage people to keep in mind:
After a major financial event, it's natural to feel like you're supposed to do something. That can quickly turn into buying stocks, investing in real estate or franchises, funding a friend’s business, making large gifts, or pursuing several ideas simultaneously.
That instinct is understandable, but making big decisions before you have a framework for evaluating them increases the risk of choices that don't align with your longer-term goals.
Some choices can be difficult to reverse. Acting too quickly could limit the flexibility you have later, once you’ve had more time to decide what is actually important to you.
A large financial event can attract attention you weren’t expecting.
I’ve seen situations where a large wire arrived in someone’s bank account and representatives from the institution began reaching out almost immediately. A sudden increase in an account balance may prompt calls asking what happened and how the institution can help.
That attention can add another layer of pressure at a time when you’re already processing a major transition.
You don’t have to make an immediate decision simply because someone is asking you to make one. If you have a trusted financial advisor already in place, that person can serve as a buffer during this period and help you set a pace that makes sense. If you don't already have one, this is an important time to connect with one—before making decisions, not after.
Without a clear framework for how to approach a windfall, it's easy to fall into patterns that feel productive in the moment but create problems later. Here are the mistakes I see most often.
There's an urgency some people feel to put the money to work immediately—buying stocks, investing with friends, acquiring a franchise, helping someone start a business. These may all be reasonable choices under the right circumstances, but when they're made quickly and without a broader plan, they can become difficult to reverse. Investing with friends or family, in particular, can strain relationships if the outcome doesn't match expectations.
Sudden wealth can make possibilities that once seemed out of reach feel immediately attainable.
You might consider buying property, investing in private businesses, helping relatives, increasing charitable giving, or making major lifestyle changes. Pursuing too many of those ideas at once can make it difficult to see their combined impact.
Some financial decisions are easier to enter than exit. Before making a major commitment, consider how much flexibility you may want six months, a year, or several years from now.
Your perspective on the windfall may change as you have more time to process it. Locking into major decisions too early can mean those decisions don't reflect what you ultimately value most.
Depending on how the wealth was received, the amount that lands in your account may not represent the amount ultimately available for you to spend or invest.
A business sale or other taxable liquidity event, for example, could create a significant future tax obligation. Planning around that potential liability before allocating the rest of the money can help avoid an unpleasant tax surprise later.
The earlier tax planning begins, the more strategies may be available.
Sudden wealth involves numbers, but the numbers are only part of the story.
Financial readiness is the side of planning people tend to expect. We can assess and model questions such as:
Those are important questions. But they don’t tell us whether you are personally ready for what comes next.
I’ve worked with business owners who were financially prepared to sell but hadn’t really thought through what life would look like without the company.
Most people haven't had the space to think this through. They're busy running businesses, raising families, managing careers. They've been told to save and invest and grow their assets—but they may not have had the chance to picture what comes after a major transition.
I once began working with a woman after she had received an attractive offer and sold her business relatively quickly. Financially, the transaction was meaningful. Emotionally, she hadn’t had enough time to process what came next.
It took close to a year before she felt comfortable making significant decisions about the next stage of her life.
The same dynamic can accompany an inheritance. Other people may focus on the money you received, while you may be dealing with the loss that caused you to receive it. Emotional readiness can take time, and that’s one reason major financial decisions don’t always need to happen right away.
One concept I come back to often with clients is the philosophy of money: what is this money for?
If you don't have a clear sense of purpose for your wealth—a North Star—then every decision can feel disconnected. When you do have a North Star or roadmap, you have a frame of reference for asking whether a decision fits your values, goals, and priorities.
Consider questions such as:
A financial plan can translate those answers into a framework for making decisions as opportunities—including windfalls that are expected or unexpected—arise.
Tax considerations vary significantly depending on how the wealth was received and your individual circumstances. For example, some inheritances or other windfalls may be treated differently from a taxable business sale or liquidity event.
That makes individualized planning particularly important.
When there's lead time before a windfall, several approaches may be worth exploring:
The goal is to identify which tools actually apply to your circumstances rather than starting with a predetermined strategy.
Some of these approaches can take significant time to evaluate and implement. That’s one reason I encourage people to start planning well before a transaction whenever possible.
If the event has already happened, planning could still be key. Depending on your circumstances, there may be strategies to explore around:
In every case, the process starts with a deep review of the client's full picture. That review is what reveals which tools are available and how to apply them.
I don’t believe people should feel guilty about receiving a windfall or wanting to enjoy it.
Maybe you want to help your children. Maybe you want to give to friends or charities. Maybe you want a new home, more travel, an earlier retirement, or the freedom to pursue a completely different lifestyle.
I’m not there to judge those choices. My role is to help you see how they fit together.
This is where scenario planning can be particularly useful. We can model questions such as:
This is one of the more rewarding parts of the work I do with clients. I can walk someone through visual illustrations of how different scenarios affect their retirement, their giving goals, and their long-term financial picture.
The plan becomes a living, breathing tool, and clients get to see choices they didn't know they had. It opens doors, and the exploratory process of modeling those options can shift the entire tone of the conversation.
A major wealth event can also be an appropriate time to take an objective look at the professionals advising you.
Perhaps you began working with your financial advisor 20 or 30 years ago, when your circumstances were very different. That person may now even be a good friend and someone you are comfortable with. But the advisor who was right for you then may not be the right fit for the complexity of your financial life today.
As your circumstances change, it can be worth asking whether your current team has experience with situations like yours and whether they have the capabilities to address more complex tax, estate, investment, or business-planning needs.
There can sometimes be a natural inertia in long-standing professional relationships, and that can make it harder to step back and assess whether your advisor is still the right fit. I think of it the same way you might think about a medical decision: when there’s a lot at stake, sometimes going to another doctor to get a second or third opinion can help you decide who is best equipped to handle what you’re facing.
The source of the wealth can affect how it is taxed and which financial planning strategies may be available. A business sale, for example, can involve transaction-structure and tax considerations that do not apply to an inheritance or lottery win.
The decision-making process can differ as well. Someone who has just sold a business may need time to figure out what life looks like after stepping away from the company, while someone receiving an inheritance may not be ready to make major financial decisions while also processing a loss.
The planning approach should reflect those differences rather than treating every windfall as the same financial event.
At EP Wealth, we help clients look at significant financial decisions in the context of their broader lives, from financial and investment planning to tax and estate considerations. Because no two windfalls come with the same circumstances, the planning approach should be tailored to the individual.
If you are anticipating a liquidity event or have recently received a financial windfall, a financial advisor can help you explore your options and build a roadmap around what matters most to you.
If you've recently experienced a windfall—or expect one in the future—EP Wealth's financial advisors can help you develop a plan that fits your circumstances. Reach out to start a conversation.
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