Newly wealthy? Advisers say to make an estate plan | Long Island ...

Whether a fortune comes to Long Island residents by inheriting it, by winning the lottery or by selling valuable stock, those with unexpected wealth are likely to indulge on big ticket items, such as a sports car or other extravagances.

Financial planners advise to do otherwise. Since sudden wealth can bring both thrill and panic, experts say the newly rich must step back and take precautions. One of the first of many steps should be to craft an estate plan, according to financial planners.

The estate plan must take care of a variety of issues, including putting aside money to pay taxes, going over wills to update beneficiaries, and arranging a power of attorney to assign financial authority in case of emergency or incapacitation.

Also to be considered is setting up a trust account with the assistance of a qualified adviser, who can help to protect the estate from excessive taxes and also set up a schedule for children to inherit funds that parents are comfortable with.

There are several other pieces of advice from financial planners. They include:

? Take time to make decisions about what to do with the money. Don't make an expensive purchase or rush into an investment.

? Evaluate how long the money will last. People should set aside living expenses for 18 months in a liquid fund, then put the rest of the money into short-term accounts while important, long-term decisions are made. Determine, based on an estimate of future expenses, how long that money should last.

? Avoid falling for get-rich-quick schemes pitched by friends and family members. People should discuss any prospective investments with neutral financial planners.

? Draw up a contract and repayment schedule should friends and family members ask for a loan.

? Make long-term investments and diversify them.

? Give to charity to relieve tax burdens and to help others with the money.

Source: Wall Street Journal, "Too Rich, Too Soon," Jessica Silver Greenberg, Feb. 25, 2012

Source: http://www.longislandestateplanningblog.com/2012/03/newly-wealthy-advisers-say-to-make-an-estate-plan.shtml

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