Receiving a Windfall

What constitutes a “Windfall”?

“Windfalls” occur when individuals receive large amounts of money in sudden and sometimes unexpected ways

• The sources of the money can differ, including for example an inheritance, a gift, winnings (e.g., the lottery), a legal settlement, sale of a business, divorce, or a large bonus
• Oftentimes “windfalls” are accompanied by intense emotions, for example grief due to the loss of a loved one, or joy due to good fortune – feeling either emotion is very normal
• There is no legal or regulatory minimum size that defines a “windfall” – it is highly subjective, but feels consequential to you, the recipient

Traps to avoid?

• Do not be rushed – take your time to take stock, gather information, reflect, and then make informed decisions
• While of course allowing yourself some small indulgences, avoid the temptation to splurge, to make major purchases fast
• Be wary of “long-lost-friends” that may come out of the woodwork

What best practices to consider?

• Depending on the source of your “windfall”, determine the tax implications, and set aside cash for any taxes due — your tax or financial professional can help
• If relevant, it may be a good idea to pay down debt, in particular if you hold high-interest debt – this will improve your cash-flow and benefit your credit rating
• If you don’t have one already, establish or top off your emergency fund to be prepared for a “rainy day” (3-6 months expenses in safe and liquid cash-type investments, e.g., CDs or savings accounts)
• If there is an opportunity to take the money over time as opposed to a lump-sum (sometimes the case e.g., with lottery winnings), compare both options with your financial professional; to note, taking the money over time may have monetary and behavioral benefits
• Update your existing or start a new Financial Plan – work with your financial professional to articulate and prioritize your life-defining goals, both short-term and long-term; then construct your investment program to meet these goals
• Work with a financial professional to set up and maximize investments in both tax-advantaged and taxable account types
• Update your existing or start your key Trust & Estate documents – the windfall will most likely cause major rework given new wealth levels, new goals, and new Trust & Estate opportunities
• If you are philanthropically inclined, rethink your gifting strategies, and explore setting up a Foundation or funding a Donor Advised Fund
• Consider keeping your day job – staying engaged in your current (or another) job has multiple benefits, including purpose, belonging, income, healthcare, Social Security contributions, etc.

Supporting Information

Last Reviewed: 12/22/2025

Key Sources and Further Reading

• “Tips for Managing a Financial Windfall” by FINRA
• “Financial Windfall” by National Endowment for Financial Education
• “16 Smart Steps to Take When You Receive an Unexpected Financial Windfall” by Forbes
• “How to Manage a Large Cash Windfall” by Everplans
• “Unexpected Financial Windfall” Don’t Make the 10 Common Mistakes” by Forbes