A Fortune of Success

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Fall 2012

Who hasn’t heard a sad story of a lottery winner who falls into financial hardship within a few years of winning the jackpot? Unfortunately, similar cautionary tales can be told of people who inherit large sums of money or successful business owners who sell their company without a plan in place.


“In today’s world, money can go quickly,” warns attorney Albert Andrews, Principal with the Minneapolis, MN-based law firm Gray Plant Mooty. “Without sound financial and estate planning advice, most people will not understand the consequences of spending that money foolishly until it’s too late.”


Thirty years ago, at the age of 21, one of Andrews’ clients inherited a sizeable estate, free of trust

and with no restrictions. “At her current rate of spending, she won’t have any money left by the time she hits retirement age,” he reports.


Potentially avoid a similar situation by considering the following ideas:


Three Steps to Work Toward Potentially Protecting Your Sudden Wealth


Seek Advice, Take Your Time

Ask a dozen financial advisors what you should do first when you receive a sudden influx of cash and you’ll get the same answer: Seek competent advice from a trusted advisor. This advice holds true for those who have never managed large amounts of wealth before and those who are well versed in money matters.


Depending on the circumstances, competent advice may include guidance from a seasoned investment manager, counsel from a good estate planning attorney and tax help from an experienced certified public accountant. For example, the rookie ball player with the large contract may need different advice than the young man who inherits from his parents or the business owner who just sold her company.

Tab 2

Fall 2012

Think Net After Tax

Even a sizeable estate can be drastically reduced by taxes. Too many times people fixate on the before-tax number, be it a business owner who is selling his or her company or an heir who is anticipating a large inheritance.

“It’s imperative that people have a real understanding of the value of what they will be receiving before they begin spending,” says Joel Yudenfreund, Wealth Management Strategist with The Private Client Reserve. Otherwise, you could overextend yourself by purchasing the larger house, vacation home, boat or car you’ve always wanted, Yudenfreund cautions, before factoring in the potential tax ramifications.


Tax Terminology


Know Your Limitations

Before spending the money, it’s important to understand for every dollar of principal used to make a purchase, there will be one less dollar potentially earning income that can be used to pay the expenses. For example, if you chose

to put $1 million down on a new home, it’s important to recognize the future costs that will go into that purchase. In other words, consider ongoing property taxes, insurance premiums and maintenance expenses, as well as the initial purchase price. “This cycle of making purchases that create expenses and decrease disposable income to pay expenses is frequently not appreciated and could lead to problems,” Yudenfreund says.


Put a Plan in Place

Now that you know what your new wealth actually represents, your next step is reviewing your existing estate plan. In some cases, you can just fine tune what you have. In others, you may need to start over.


But in virtually all cases, Andrews says, “new wealth opens up a plethora of planning opportunities and potential tax savings.”


U.S. Bank and its representatives do not provide tax or legal advice. Each individual’s tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation.

Please see important information below.

Financial Planning