Finding yourself in a situation where you have newly, suddenly come into wealth, can present you with many tax implications. Before you spend any of your newfound cash, speak to a wealth advisor in Northern Virginia. Find out how this sudden wealth will impact your taxes and future finances.
Do I Need Wealth Advisors?
Understanding your sudden wealth and the impact it has on your finances is crucial. Unexpected money is not necessarily free money. When you receive sudden wealth, no matter what form it takes, the IRS will know about it. How you declare sudden wealth and the tax percentage it is subject to will depend on two main factors: First, the state in which it occurs; Second, the type of windfall you receive.
For example, winning the prize at a charity event in Virginia is different than a huge gambling win in Vegas. The laws governing tax vary by state. Some states collect two types of taxes. Furthermore, you may need to file a return in the state the windfall occurred in as well as your state of residence.
Therefore, we strongly recommend consulting a sudden wealth advisor in Northern Virginia before you book that cruise, buy that new car, or invest a lump sum. Making bad decisions can end up costing you even more money in the long run. It may be that the event of a sudden windfall would cause the need for a financial plan and guidance that you have not needed in the past. Thoughtful planning and sound strategies are as important in a sudden wealth scenario as they are in more common wealth situations.
How Sudden Wealth Advisors in Northern Virginia Can Minimize the Tax Burden
Speaking to a professional right away offers you several advantages. One of those advantages is that a sudden wealth advisor can advise you on how to keep as much of your gain as possible. A wealth advisor can help you understand your options and choose the best ones for your situation.
For example, you may be able to make additional contributions to your IRA or offer tax-exempt gifts to your children, pay tuition or medical bills for loved ones, make donations to your favorite tax-exempt political organization or make other charitable donations. All these options lessen your overall tax burden.
Sudden Wealth and Tax Brackets
One of the disadvantages of sudden wealth is that it can bump you up into a higher tax bracket. While it’s not the worst thing in the world, this can have consequences that you might not have considered. Perhaps you have health insurance through the marketplace and received an advanced premium tax credit. A windfall could have a significant impact on that tax credit.
Other things that could be affected by a change in tax bracket include college scholarships, housing allowances, and low-income home loans. Sudden wealth can arrive in a multitude of unexpected ways. Likewise, there is a variety of financial situations and numerous ways to manage them through losses and gains. A wealth management advisor in Northern Virginia can help you understand these impacts and plan accordingly.
Sudden Wealth Advisors in Northern Virginia
A huge windfall can be exhilarating, but don’t forget to think about the long-term effects of your decisions. While a windfall can help improve your current financial situation, it can also offer significant advantages to your long-term financial strategy. To learn more, contact Argent Bridge Advisors today.