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How To Manage Your Newly Acquired Wealth

The classic situation is that of a lottery winner. Suddenly, they have an army of new friends, well-wishers, and advisors. They are now tempted by the world of seductive possibilities. Unfortunately, all too often such stories end up unhappily. This is beside that fact that you’ve just won the lottery because inheriting a large sum of money is quite common. Whether it is a divorce settlement, inheritance, sale of a business or some other means of acquiring large amounts of wealth, it can mean that you are at a crossroad. Now, you have to shift from wealth building mode to wealth management mode. You will face circumstances specific to your situation. However, there are some general guidelines that apply to all such transitions.

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Take Your Time:

Financial windfalls often come with emotional drawbacks. The loss of a loved one, a serious injury, leaving a long-time job, or leaving a business. Even for a lottery winner, learning how to manage their newly acquired wealth can be a long-term challenge. Thankfully, there are ways to manage your money quite effectively. Cash can be parked in a money market. It can be also be put into an interest-bearing bank account. Although interest rates aren’t impressive these days, although you won’t lose money, you’ll be earning money. In most cases, you may want to give yourself some time to regain your emotional bearings. You should also think about how your new wealth can give you the most satisfaction.

Setting Goals:

Think of your lump sum cash wealth not as a pretax payment, but as after-tax payment. Also, think about whether this figure is enough to support the lifestyle you want to live? Or do you want to continue working in your present position? You could also use the money to clear your debts, pay for your kids’ college education, invest for your retirement, or simply leave the money for those who will survive you after you die. In either case, you’ll need to update your estate plan and provide for their management in the event of your incapacity with a revocable trust and a durable power attorney.

Taxing Matters:

Is your new wealth taxable? It is taxable if it comes from lottery winning, royalty fees, severance payment and the like. However, even legal judgments are taxable unless they are awarded for physical injuries. Also, if the money comes from any sale of the business, it is subject to taxes on the capital gains. Proceeds from a sale of residence is also subject to capital gains tax. But the first 500,000 may be exempt for a married couple. Also, pension payments are also subject to taxation and tax can be rolled over if differed into an individual account.

It can be Extremely Complicated:

Certainly, all this talk about managing your wealth has boggled your brain. Now that you know that managing your wealth isn’t as easy as you thought it was, maybe now is the time you can consult with a Wealth Management in Arizona.

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