What to Do With an Unexpected Bonus or Windfall

Sudden wealth, whether it comes from an IPO, business sale, inheritance, legal settlement, or even a lottery win, can feel exhilarating. But without the right mindset, guidance, and strategy, a windfall can quickly turn into a missed opportunity. Poor decisions, lack of planning, and unawareness of tax consequences are common pitfalls of coming into an unexpected bonus or windfall.

Handled wisely, this influx of money can become a powerful tool to secure your future, support your family, and achieve long-term goals. Here’s how to approach a windfall with clarity, purpose, and confidence.

Initial Steps After Receiving a Windfall

Before making any major decisions, like quitting your job or purchasing a vacation home, take a pause. The emotional high that accompanies sudden wealth can cloud judgment. Give yourself a buffer of 3 to 6 months where you avoid major lifestyle changes. Use this time to reflect on your values, goals, and what you want the money to do for you and your family. Sudden wealth can be disruptive if not grounded in purpose.

In the meantime, move the funds to a secure, liquid account, such as a high-yield savings or money market account. Make sure your deposits are within FDIC insurance limits, or consider a bank that offers extended FDIC coverage for higher balances.

Build a Trusted Financial Team

Navigating a windfall is complex and best done with professional support. Assemble a team that includes:

• Fee-only financial advisor: Develops your long-term plan and coordinates your overall strategy.

• Tax professional: Helps you understand and prepare for tax implications.

• Estate planning attorney: Updates or creates wills, trusts, and beneficiary designations.

• Insurance specialist: Assesses whether additional coverage, such as an umbrella policy, is needed to protect your growing wealth.

This team ensures your decisions are aligned and that nothing falls through the cracks.

Understand the Tax Implications

Different types of windfalls come with different tax consequences. Understanding these upfront can save you from costly surprises.

• IPOs and Stock Options: Learn the tax treatment for RSUs, ISOs, and NSOs. Watch for AMT (Alternative Minimum Tax) triggers.

• Business Sales: Coordinate with your CPA on capital gains strategies and explore QSBS exclusions or installment sales.

• Inheritances: A step-up in cost basis may apply to capital assets, but large estates may be subject to estate tax.

Set aside a portion of your windfall in a liquid account to cover any potential tax liabilities.

Create or Update Your Financial Plan

With new financial resources comes the need to reassess your financial plan:

• Revisit your cash flow and budget.

• Pay off high-interest debt and evaluate whether to keep or eliminate low-interest loans.

• Rebalance your investment portfolio in line with your updated risk tolerance and long-term goals.

• Revisit your estate plan to reflect your new financial reality.

Avoid impulsive or speculative investments and ensure all decisions are made with intention and strategy.

Mindset Shifts

Guard Against Lifestyle Creep

It’s tempting to reward yourself with luxury purchases. While that can be part of your plan, unchecked spending can quickly erode your wealth. A financial plan provides boundaries and ensures your money lasts.

Prepare for Friends and Family Requests

Generosity is a wonderful expression of abundance. But it helps to decide in advance how you want to support others—how much, how often, and under what terms. A giving strategy can help maintain relationships while preserving your long-term goals.

Establishing a clear purpose for your wealth will serve as your North Star as you navigate decisions and opportunities.

What’s next?

A windfall offers a rare opportunity to build lasting wealth, support future generations, and pursue personal aspirations. But without the right approach, it can easily slip away. By taking a thoughtful pause, building the right team, understanding your tax obligations, and embracing a purpose-driven mindset, you can transform your windfall into long-term financial security.

Need help making a plan? Schedule a consultation with our team to start building a strategy for lasting success.

William Medcalf
Senior Financial Planning Associate, Wiser Wealth Management