What to do if you get a substantial increase in income or net worth.

What to do if you get a substantial increase in income or net worth.

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From time to time, I get a call from an old or prospective client who wants to know what to do now that they have run into a lot of money, either through receiving higher income or through receiving a large lump sum due to inheritance, lawsuit win, or other event. There are several key areas to keep in mind, but the overall rule is to call your estate planning lawyer and accountant right away.

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Here are some areas of impact to discuss with your estate planning lawyer:

Reducing income taxes

If you have a large change in income, it may be that you find yourself in a tax bracket that taxes you more than you expect, and so you want to get some advice on what that might look like and if there are any ways to reduce your tax liability. There are many ways to do this if it’s necessary, but the decision should involve both your estate planning lawyer and your accountant.

Reducing estate taxes

If you have received a lump sum, such as an inheritance, you want to learn about whether that amount increases your estate value to the point that it is now taxable if you die. Federally, the estate tax exemption is $11.4 million per person, meaning that you are only taxed on what you own over that amount, so its does not affect very many people. In Oregon, however, the exemption is only $1 million per person, and it is a lot easier to get to that if all you own is a home and a life insurance policy. An inheritance or other lump sum can push you over the edge into estate tax land. Knowing what sort of taxes you owe will help you to decide if you need to do any planing to reduce or avoid those taxes. Some people opt to just pay the tax, some plan for a portion of the estate to go to charity. The options are many.

Shielding assets

Now that you have a substantial increase in net worth, you will want to get some advice on how to protect your assets if you get divorced, get sued, or become unable to make decisions. There are various ways to shield your assets and to protect yourself and your family from creditors and predators. The options will vary based on your particular situation and net worth.

Preserving assets for heirs

If you know that what you will be leaving for your children or other heirs is going to be substantial, you will want to make sure that you leave it in a way that protects it for them. People really underestimate how grief affects people and makes spending money feel good. And when the amount is substantial, it feels like it is never going to end. Sometimes even responsible adults need protection from themselves when it comes to grief and money.

Charitable planning

 Depending on how much of a lump sum you have received, your estate may be at the point that it is time to consider your overall legacy, and whether there is any charitable planning you wish to do. This type of planning not only makes the world a better place, but it can also be part of an overall tax reduction plan.

Keep these points in mind if you ever find that you have a substantial raise in income or receive an inheritance or other lump sum. But do not forget the most important point, which is to call your estate planning lawyer immediately.

If you want to get started on your estate plan, read about our estate planning services and schedule an appointment.

To your family's health + happiness.

~Candice N. Aiston

P.S. Want to get started slowly but surely, naming guardians for your kids? Check out our Guardian Plan kit.


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Candice N. Aiston is an Legal Planning Attorney for Estates + Businesses in the Portland, Oregon area. She helps people to prepare for a lifetime of security, prosperity, and guidance. If you would like to receive her free reports, please visit http://aistonlaw.com/ to sign up. Follow her Facebook page for daily planning tips: https://www.facebook.com/aistonlaw/.

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