Money fantasies are nice. Some of them even come true – unexpected inheritances, yearend bonuses and yes, in even one in several hundred million chances, a winning Powerball ticket.

Most of us have fantasized about the fun we'd have with found money if it ever found us. But how many of us have fantasized about what we'd do to make it do the most good for our families, the causes we care about and ourselves? Keep these ideas in your hip pocket if your ship ever comes in:

Make sure you have good tax, legal and financial planning advice: This is a good idea even if you never receive a windfall. A qualified tax adviser, attorney expert in estate matters and a financial planner will ground you in reality before your fantasy comes through. Should unexpected money appear, each expert would be able to look at your personal situation and assess the risks and strategies necessary to accepting the funds without costly tax or investing mistakes. While inheritances are not in themselves subject to income tax, bonuses and gambling winnings may be taxable at your highest marginal rate or even place some of your winnings in a higher tax bracket. State and local taxes may also apply.

Force yourself to think about true necessities before luxuries: The adage "Pay yourself first" also works in the fantasy world. What are the biggest financial problems you'd like to solve today? That might be the best approach to thinking about your reaction to a windfall. Have you always dreamed about buying a home and owning it outright? Shoring up a retirement and healthcare strategy that would stand you in good stead no matter what the market did for the rest of your life? How about paying for your kids' college in cash so they wouldn't have to shoulder debt after graduation? Taxes can eat away a significant portion of unexpected wealth, so it is best to set priorities first to create a lifetime of financial health. It makes little sense to have a brand-new luxury car in the driveway if retirement goals and other
family objectives are left unfulfilled.

Pre-think a plan for helping others: The news media are littered with stories about poor souls who waste sudden fortunes after being preyed upon by friends, family members and strangers with a "cause." Giving to others – whether part of a wealth management strategy or simple yearend tax strategy – should be planned with the best advice based on the circumstances and assets available. As long as you're fantasizing about wealth, consider fantasizing about the people and organizations you would really want to help with any extra money you had, and commit to getting the right financial advice before writing a single check. There are a few smart ways to give away money – and many more dumb ones.

Know your fellow winners. It's one thing to go in with co-workers or family on a weekly lottery pool on a casual, fun basis. Unfortunately, that friendly group dynamic could change significantly with a big windfall. This is clearly a question for your tax and legal advisers, but some experts suggest that people who regularly gamble together draft a partnership agreement that can be reviewed by a qualified attorney. The partnership might also obtain a Federal Employer Identification Number that enables the winnings and the tax burden to be distributed along agreed-upon lines if it acquires a winning ticket.

Know the tax impact of any court award. If you win money in a court case, you may be sharing it with Uncle Sam. Generally, compensatory damages for personal physical injury or physical sickness are not taxable. However, other types of court-related compensation could be taxable as ordinary income – that's why it's critical to check with a tax adviser as part of your legal strategy.


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