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The Money Talk: The One With the Sudden Windfall

By Ashley Bleckner

Not-so-fun fact: 61% of women say they’d rather talk about their own death than have a conversation about money. That’s some societal money taboo BS, and we’re ready to change that. So this is The Money Talk, a series in which we’ll be answering example* questions about how to kick-start important money convos.

Dear Ellevest,

I recently inherited some money. OK, not just some — a lot.

Don’t get me wrong, I’m very, very grateful for this gift. The problem is that I feel self-conscious around the people who know about it — I don’t want to be insensitive. After all, I now have quite a bit more wealth than they do. So now I’m not sure who to talk to about the big decisions in front of me, like where I might want to live next.

And what should I say (and do) if someone asks me for money? This is such a weight to manage — making sure that this money gets put to good use, and used like it was intended — and I want to be the best steward I can.

Help!

Sincerely,
Windswept Windfall

The Money Talk: The One With the Sudden Windfall

Dear Windswept,

We’re sorry for your loss — a time like this is emotional enough without having to juggle those kinds of questions.

Your nerves are more common than you might think — the financial advisors on Ellevest’s Private Wealth Management team have heard people who inherited money, people who worked at start-ups that went public, and, yes, even lottery winners say they feel the same way. There isn’t really an instruction manual that comes with this situation.

Here’s our advice for you and others going through it.

4 people to talk to first

Receiving a large amount of money — whether via inheritance, earnings, or another circumstance — is an emotional experience (and can feel like a big responsibility!). So before you make any decisions about what to do with that money, build yourself an A team.

At the very minimum, we recommend finding:

  • A financial advisor to help you invest your new assets and build an overall financial strategy.

  • An accountant to help you get in line with tax laws and file your taxes each year.

  • An estate attorney to give advice and draw up legal documents (like wills and trusts) to help you get a solid plan in place for preserving your wealth during your life (and afterward).

  • An insurance broker to help you get enough (of the right type of) coverage to protect you and your belongings. Ask them to check that you have enough property and life insurance coverage and help you understand other insurance-related things you should be thinking about now that you have more wealth.

These professionals can provide advice and help you make sure you’re covering all your bases along the way.

Get a foundation into place

The person who left the inheritance to you did it for a reason — they want you to put it to good use. So here are the first few steps we recommend taking:

  1. Pay off any high-interest debt (that is, debt with an interest rate over 5%, including credit cards, student loans, etc.) that you may have. That interest can really cost you.

  2. Set aside some money in an account that’s liquid enough to be useful in the event of a financial emergency (like a savings account).

  3. Get on track for retirement, if you aren’t already. Your financial advisor is the right person to help you with this step.

  4. Contribute to any other financial priorities you might have, like paying down a mortgage, saving for a child’s education, starting a business, etc. Or maybe you want to help friends and family, like by contributing to an aging parent’s mortgage or a niece’s college education. Or you might want to donate some of it. (Your financial advisor can help you prioritize these, too.)

  5. Work with your financial advisor to create an investment plan for the rest of your money. They can help you build a plan that’s catered to your goals, lifestyle, and values.

  6. Work with your estate attorney to build an estate plan so that you can leave a legacy for any future heirs.

And once you’ve got the basics into place, don’t feel bad about using a bit of that money for yourself today.

On requests for money or helping others

This is a big one. We’ve all heard stories about people who got a sudden windfall and found themselves inundated with requests (or demands) for money from friends, family, or even nonprofits.

Friends and family members

If you want to give to a loved one after they’ve asked for your help, that’s wonderful! Keep in mind: It may be good to ask them to keep the situation as private as possible so that you don’t get a reputation as the International Bank of You.

But if you don’t think that giving the person money is the right decision for you, it’s OK to gently decline. Again, your loved one gave this inheritance to you. We can’t promise that this conversation will be easy. But if it becomes necessary, one approach might be to explain that you aren’t just sitting on a pile of cash. Your wealth is tied up in investments, not available as disposable income, which can make giving money difficult and complex.

Nonprofits

Sooner or later, you’ll probably start getting donation requests from nonprofits or people who hold those nonprofits dear to their hearts. Giving to charity is wonderful, but there are 1.5 million nonprofits in the US alone. You’ll inevitably have to draw the line somewhere.

One thing you could do is open a donor-advised fund, which would let you invest some of your assets for the purpose of giving to charity. You’d invest them via your donor-advised fund today, give them the chance to grow over time, and then make donations to your nonprofits of choice down the line.

No matter who’s asking, though, remember: Your wealth is yours, and the way you put it to good use is up to you.

You got this.
Ashley


Click here to contact an Ellevest financial advisor in your area.

Disclosures

Note: The person asking the question in this article isn’t real. We made her up so we can show you the kind of tough money talks people sometimes struggle with. In other words, this is a hypothetical scenario that doesn’t represent any Ellevest client, and it’s by no means individually tailored advice.

© 2019 Ellevest, Inc. All Rights Reserved.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Information was obtained from third party sources which we believe to be reliable but are not guaranteed for accuracy or completeness.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

Ashley Bleckner

Ashley joined Ellevest after 8 years’ experience helping high net worth clients toward their financial goals. Today, she’s a financial advisor on Ellevest’s Private Wealth Management team, working with clients to help them develop personalized long-term investment plans that align with their goals and values.