Will you receive a large insurance settlement or damages from winning a lawsuit? This money will be an important part of your recovery from whatever wronged or injured you. But before you get a check, take the time to do some financial planning. Here are a few key steps to take and why.
1. Work With a Pro
One of the first moves you should make is to meet with a professional financial planner or wealth management expert. These trained financial professionals work for you, so they will help you decide on your goals, make a plan to reach them, and keep you on the right path.
2. Decide Where to Park It
When you receive your settlement, where will you put it? Depending on the sum, you may start by parking it in a fully-insured bank account. Some accounts also allow you to begin earning higher interest or dividends while you map out a long-term investment plan. Just be sure you can access it, but that no one else can.
3. Pay Your Tax Liabilities
Before you do anything else, make sure you fulfill all your tax obligations. Meet with an accountant to prepay or set aside enough to cover both federal and state income taxes. Assuming the IRS won't find out about the money could get you in serious trouble, which you don't need right now.
3. Plan Before Giving
Anyone who comes into a lump sum of money faces two emotional challenges involving their loved ones. The first is the desire to give money to those they love. The second is people who want money from them. Decide now how much you will give out, why, and to whom. Make a financial plan for yourself before helping anyone else. After all, this money is to help you after serious harm.
4. Look Forward and Backward
When planning out what to do with your settlement, many people start by looking backward. This means paying off past debt — first, related to the injury and then other debt. Then, look forward. Make this money help you as far in the future as possible, using tools like trusts, investment, annuities, and tax planning. And don't forget the distant future by doing estate planning.
Where to Start
As mentioned, the first step toward success with any settlement is to work with an experienced wealth planner in your state. Make an appointment today and start preparing for a financially stable and healthy future. For more information on wealth management planning, contact a professional near you.