Don't get blown off course by a windfall
So you've experienced a financial windfall and you don't know what to do with it. This is what we refer to as a "luxury problem," right?
Indeed, you'd think this would be the most glorious dilemma possible to befall you and your household. But for some, a windfall can be more of a curse than a blessing.
This is especially true because, while some windfalls follow exciting and positive life events—such as the sale of a successful business or winning the lottery—others are the result of a divorce or a loved one's death.
Whatever the circumstances, it's common for people who've come into money to experience a significant amount of emotional stress, both preceding and during the receipt of new funds or assets. It is important, therefore, to have a plan in place to guide you through the process of receiving—and dealing with—a financial windfall.
(Read more: Make sure you don't crack your nest egg)
Step 1: Do nothing. Absolutely nothing. You must not underestimate the emotional and physiological burdens that receipt of life-changing money can impose. After a client of mine received his payoff from the lucrative sale of a business he'd helped bootstrap, he wisely submitted to the weight of his windfall by setting aside sufficient time to purposefully accomplish nothing at all.
This "healing" process becomes even more important when the windfall is the result of negative circumstances. It is good common sense to wait at least one year before making any life-altering decisions.
Healing will help you make the next set of important decisions with greater clarity.
(Read more: My, oh myRA, what a misguided mess)
Step 2: Envision the way the windfall will change your life. A financial windfall changes life as you know it—whether you want it to or not.
While some of this will be positive change, some will almost certainly be negative. You're forced to deal with conflicting feelings on either side of this equation. You may struggle with the guilt of benefiting financially from the loss of a family member. Conversely, while you're fortunate to have more money, you'll also be sharing a greater amount with your least favorite relative—Uncle Sam.
Some will love you for your money, while others will despise you for it. You will gain new friends that you don't want, and sadly, you will lose friends—sometimes even family members—who struggle to reconcile your fortune with their perceived misfortune.
Begin to take stock of what is likely to change in your new reality, keeping in mind that the amount of change you expect will undoubtedly correlate with the size of your windfall.
(Read more: 40-plus not too old to start saving)
Step 3: Learn to say no. An unfortunate but predictable ramification of being newly enriched is the number of folks who will appear, as suddenly as your windfall, with financial needs you can apparently remedy.
A very important corollary of Step 1 is avoiding handouts initially. Even a single handout sets a precedent that can spiral out of control very quickly. I've had the misfortune of seeing one lottery winner, who won enough money to be financially independent for life, forced back into his job loading furniture onto a truck only two years after his windfall—primarily because of the many generous gifts he gave to friends and family who had their hands outstretched.
Gifting is entirely appropriate after you've completed a few more steps. But the gifts should be proactive, not reactive.
"There's no denying that a windfall will most likely change your world enough to require assembling a small team of professionals who possess the knowledge and experience you lack."
Step 4: Assemble your team. There's no denying that a windfall will most likely change your world enough to require assembling a small team of professionals who possess the knowledge and experience you lack.
Depending on the size of your recently enhanced estate, you may need an attorney, a certified public accountant and a certified financial planner on your newly formed part-time staff.
(Read more: Slow and steady best way to invest in your 30s)
The attorney should be an estate-planning expert, the accountant should be a personal tax specialist, and the financial planner should exude competence in both of these areas—as well as the myriad other elements of comprehensive financial planning—helping to knit the whole plan together.
You haven't experienced something like this before, but your advisory staff should have. If any of your prospective team seems too giddy about your good fortune, doesn't like working with a team, is selling anything or is rushing you into any decisions not mandated by law or Internal Revenue Service code, they probably shouldn't be on your team.