SUDDEN PLAYBOOK W E A LT H
WHILE MOST PEOPLE THINK OF S U D D EN W E A LT H A S A P O S I T I V E , Q U I C K LY CO M I N G I N TO A L A R G E SUM OF MONEY OR ASSETS SHOULD BE APPROACHED LIK E ANY OTHER PAR T OF YO U R F I N A N C I A L L I F E . TA K I N G THE TIME TO PROCESS THE EMOTIONAL AND FINANCIAL I M PA C T O F YO U R W I N D FA L L A N D C R E AT I N G A W EL L -T H O U G H T- O U T P L A N FO R W H AT TO D O W I T H I T CAN MAKE ALL THE DIFFERENCE.
CONTENTS Sudden Wealth: Causes, Complications, and Solutions
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What to Do Immediately After Your Windfall
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Ways Sudden Wealth Can Be Ruined
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Helping You Navigate Your New Life
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About Us 12
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S U D D EN W E A LTH PL AY B O O K
S U D D E N W E A LT H : CAUSE S , COM PL ICAT IONS , A N D S OLU T IONS People acquire sudden wealth in a number of different ways. Most people think of sudden wealth as winning the lottery. While lottery winners are certainly sudden wealth recipients, they are rare. More commonly, my clients gain sudden wealth because they’ve lost their spouse (either through death or divorce), sold their business, inherited family assets, won legal settlements, or are simply retiring. Despite how someone acquires their wealth, there is always one constant: sudden wealth should be approached thoughtfully with an eye toward the future. The following are some of the most common ways you might find yourself accumulating large sums of money instantly, and how we can help you manage it sensibly. DI VORCE Whether you are planning for, in the middle of, or have finalized your divorce, I can provide you with immediate clarity around what you have and how your new life will look financially. As a Certified Divorce Financial Analyst® professional, I focus on working with the “out spouse, ” a common term used by family law and divorce lawyers to describe married persons who may not have been involved in paying bills, managing investments, insurance, budgeting or maintaining relationships with the family attorney, CPA, or financial advisor.
DESPITE HOW SOMEONE A C Q U I R E S T H E I R W E A LT H , TH ER E I S A LWAY S O N E C O N S TA N T: S U D D EN W E A LT H SHOULD BE APPROACHED T H O U G H T F UL LY W I T H A N E Y E TOWARD THE FUTURE.
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L AW S U I T S / S E T T L E M E N T S I understand that sometimes a wrong can never be made right—even if you receive a financial settlement. When seeking justice, many people experience a roller coaster of emotions. I can guide you through the relevant financial decisions you and your attorneys must make before and after being awarded a settlement. IN H ER ITA NCE Are you anticipating an inheritance involving a sum of money that makes you uneasy? I can help you gain clarity on what you’ve inherited and create a clear plan to help preserve and effectively manage your wealth going forward. I also work closely with your accountant, tax, and legal advisors to coordinate on your overall financial situation. BUSIN ESS TR A NSITION Even the most organized and successful business owners can feel a loss of control when selling their company. There may also be internal organizational or family issues that cause discord and uncertainty, which can lead you and/or your business partners to become frustrated and disengaged. My process empowers owners to control the conversation, preserve business continuity, and maintain productivity throughout the planning and transition phases of selling your business. EM PLOY EE STOCK OP TIONS I work to help employees and business owners break down the confusion around stock options. A simple oversight, such as not exercising the options in the proper timeline upon separation of employment, can cost you dearly. Failing to account for your income tax bracket or Alternative Minimum Tax can cause you to overpay. Even if you’re not fully vested or unable to convert your options to cash currently, I work with you to to recommend suitable strategies tailored to your circumstances.
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S U D D EN W E A LTH PL AY B O O K
ATHL ETE S A N D EN TERTA IN ER S Professional athletes and entertainers often have volatile and unreliable cash flow. I help you develop plans to smooth the ups and downs of your income over time and save enough for the future. LOTTERY W INNER S For the lucky few who hit the lottery, the thrill of winning is quickly dampened by the uncertainty that comes along with it. Moreover, if you elect not to remain anonymous, coming into sudden wealth in such a public way can complicate things even further, making your lucky day immediately overwhelming. I provide immediate clarity and work with you to develop a step-by-step plan.
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W H A T T O D O I M M E D I A T E LY A F T E R Y O U R W I N D FA L L 1. TA K E A TIM EOU T The first course of action after learning about your sudden wealth is nothing. Don’t make any immediate or major decisions about your finances. Allow time to get your bearings and make plans. Creating a decision-free zone gives you some breathing room. Protect yourself by proactively playing defense. 2. GET ORGA NIZED While it’s not time to make decisions, you should envision the types of decisions you will need to make. This requires organization and taking stock of your current financial state. To gain a clearer picture of the types of decisions you’ll have to make, ask yourself the following: •
What’s your net worth?
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What’s your income?
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What are your fixed expenses?
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Do you have any high interest debt?
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What is your insurance coverage?
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What is your tax obligation?
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How much is left over?
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How will you live during your planning stage?
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S U D D EN W E A LTH PL AY B O O K
3. A S SEM BL E YOU R TE A M A N D H U DDL E U P Now is not the time to isolate yourself. Start your search for competent professionals. For the suddenly wealthy, those professionals may include an accountant, financial planner, investment adviser, estate attorney, and even a counselor or wealth psychologist. Get to know their practice inside and out— including their service fees and their professional approach. 4. GET TH E PL AY BOOK A N D E X ECU TE Work with a professional to develop a comprehensive financial and life plan. Your needs come first and professionals understand that your hopes and fears are not identical to anyone else’s. They will help you stay in control, work through emotions, and provide valuable information that can help you set your priorities and create a plan to pursue your goals.
WORK WITH A PROFESSIONAL TO DEVELOP A COMPREHENSIVE FINANCIAL AND LIFE PL AN. YOUR NEEDS COME FIR ST AND P R O F E S S I O N A L S U N D E R S TA N D T H AT YO U R H O P E S A N D F E A R S ARE NOT IDENTIC AL TO ANYONE E L S E ’ S .
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WA Y S S U D D E N W E A LT H C A N B E R U I N E D When you experience sudden wealth, it’s easy to fall into several traps that can quickly erode or eliminate those assets. These wealth destroyers can impact anyone, but we see them hit the suddenly wealthy especially often. 1 . G I V I N G AWA Y T O O M U C H M O N E Y If you give too much of your wealth away, you can end up in a precarious financial position faster than you might imagine. Even loaning money can prove problematic and possibly disastrous. 2 . E X T R AVA G A N T S P E N D I N G There is nothing wrong with treating yourself well and enjoying a good life. If the money needs to last a long time, excessive spending can jeopardize your financial future. The key is to identify the priorities and balance them with your needs, wants, and wishes. 3. POOR IN V ESTING A ND PL A NNING If you receive a windfall, there may be a lot of professionals seeking to help you manage your money and address your planning needs. Beware of anyone who does not put you first. 4 . L AW S U I T S Your sudden wealth can make you a target for unscrupulous litigants. By working with a wealth manager who is well versed in asset planning, you can legally insulate yourself from prospective deceitful and ruthless litigants. Strong reactions to sudden wealth will gradually dissipate. Trust yourself and the process. You’ll soon be able to make confident decisions that reflect your priorities in collaboration with your advisors.
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S U D D EN W E A LTH PL AY B O O K
WHEN YOU E XPERIENCE SUDDEN W E A LT H , I T ’ S E A S Y T O FA L L I N TO S E V E R A L T R A P S T H AT C A N Q U I C K LY E R O D E O R EL I M I N AT E THOSE ASSETS.
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H E L P I N G Y O U N AV I G A T E Y O U R N E W L I F E Receiving a windfall of money is a double-edged sword. The benefits seem obvious but the pitfalls can be financially and emotionally disastrous. As a result, I’ve developed and refined a process to help clients manage both the benefits and the pitfalls of sudden wealth. CON FLICTING EMOTIONS Dealing with sudden wealth is as much about managing emotions as it is managing money. When unexpectedly coming into a large sum of money, you may experience conflicting emotions, which can be problematic. Initially, you might be happy and optimistic. However, those feelings are often followed by uncertainty, guilt, and the fear that you’ll lose the money. These emotions—combined with the desire to help your family, friends, and those who helped you in the past—can be a recipe for disaster. And that’s before you think about malicious actors who seek to separate you from your wealth. DIFFUSING COU N TER-PRODUCTI V E EMOTIONS Deescalating these conflicting emotions takes time. As advisors to sudden wealth recipients, this is where I slow things down and use education as my primary tool. In some instances, I’ll meet with you once a week for several months to understand the ins and outs of what your money means to you.
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S U D D EN W E A LTH PL AY B O O K
D E A L I N G W I T H S U D D EN W E A LT H IS AS MUCH ABOUT MANAGING EMOTIONS AS IT IS MANAGING M O N E Y.
These discussions occur before we even broach any financial planning strategies—a practice which differentiates us from conventional advisors. If you’re not in the right frame of mind, how can you focus on tax strategies and asset allocation? EDUCATION IS K EY On top of diffusing an emotional situation, I also use education as a means to help you grasp seemingly simple topics regarding personal finance—like understanding the value of money. What does $2 million mean to someone who is used to seeing a few hundred dollars at a time? For someone in this position, this kind of money often doesn’t feel real. And when it doesn’t feel real, it is easy to spend it in an unreal way. Instead of seeing your windfall as a lump sum that exists to be spent, I work with you to focus on the amount of income it could produce each year. For example, projecting your income to be $100,000 a year or so, it’s easier for you to see your money in a more realistic light. By helping you understand the real value of your money, it makes it easier to determine that maybe you shouldn’t buy two new homes instead of one.
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PER SISTING QU ESTIONS As far as dealing with sudden windfalls and family, friends, and relationships, there is no real remedy. However, I’ve found that once you gain an understanding of your finances—understand that it’s your money and you’re in charge of it—it becomes clear that it’s impossible to please everyone. Yet, questions like wondering if paying the tab at dinner will make you look pretentious or if not paying will make you seem cheap will always exist. Ultimately, it’s your decision. But as an informed investor, you’ll have a deeper understanding of your wealth and how you can use it to live life the way you want to.
FOR SOMEONE IN THIS POSITION, THIS KIND OF MONEY OFTEN DOESN’T FEEL REAL . AND WHEN IT DOESN’T FEEL REAL, IT IS E ASY TO SPEND IT IN A N U N R E A L W A Y .
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S U D D EN W E A LTH PL AY B O O K
A BOUT US KR ANSTON L. KINCAID, CDFA® VICE PRESIDENT FINANCIAL ADVISOR
Kranston Kincaid is an experienced and knowledgeable financial advisor and Certified Divorce Financial Analyst® professional. His highest priority is to help you make well-informed financial decisions, so you can pursue the life you want. Kranston earned a Bachelor of Arts from Saint Edward’s University in Austin, Texas. In addition to the Certified Divorce Financial Analyst® professional designation, he holds FINRA Series 6, 7, 63, and 66 licenses and a Group 1 Insurance license. K AREN CAULFIELD REGISTERED CLIENT SERVICES ASSOCIATE
Karen Caulfield brings more than 35 years of industry experience to our team. Karen focuses on delivering exceptional customer service and building longterm relationships with each of our wealth management clients. She assists clients through every stage of account management, from account set up to asset distribution. Karen also works diligently with our clients’ attorneys, CPAs, and other professional team members. She holds FINRA Series 7, 63, and 65 licenses.
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CON TACT US Find out how you can make the most of your windfall. Contact us today. 512.340.1824 7000 N. MoPac Expressway, Suite 400 Austin, TX 78731 kranston.kincaid@hilltopsecurities.com kranstonkincaid.com
H I L LTO P S ECUR I T I E S .CO M
Kranston Kincaid is a registered representative and investment advisor representative of Hilltop Securities Inc. HilltopSecurities is a registered broker-dealer and registered investment advisor that does not provide tax or legal advice. HilltopSecurities does not attempt to furnish personalized investment advice or services through this brochure. HilltopSecurities is a wholly owned subsidiary of Hilltop Holdings, Inc., (NYSE: HTH) with offices at 1201 Elm Street, Suite 3500, Dallas, TX 75270, 214.859.1800.
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