The Problem With Sudden Wealth

By 1996, singer Toni Braxton sold more than 20 million records. Two years later, she filed for Chapter 7 bankruptcy. In 2010, she was in bankruptcy court again, with debts up to $50 million.
 
“Sudden wealth syndrome” and is most commonly a problem with entertainers, professional athletes and lottery winners. However, according to financial advisors, it is a problem that can happen with just about anyone who quickly attains wealth.
 
Some of the reasons suddenly wealthy people lose their wealth are (1) not understanding the impact of taxes, (2) lack of understanding of investing, saving, finance, asset allocation, risk reward, diversification and inflation, and (3) pressure from family and friends to overspend.
 
Knowing about sudden wealth syndrome is important if you are planning to leave a large inheritance to someone who has never before been wealthy.
 
An estate planning attorney can help you to structure the inheritance to minimize potential problems with sudden wealth.
 
Reference: The Downside Of Sudden Wealth, Private Wealth, June 16, 2016.