Receiving a Settlement? Make a Plan Before You Spend
Receiving a settlement—whether from a trust, estate, or legal case—can be both emotional and overwhelming. For many, it may feel like a financial windfall. But unlike winning the lottery, this type of payout requires careful planning to build lasting financial stability.
Without a clear plan, it’s easy to fall into common traps like overspending, ignoring taxes, or making rushed investment decisions. The good news? With the right guidance and smart habits, your settlement can become the foundation for your long-term goals—whether that’s retirement, education, or simply peace of mind.
Here are ten steps to help beneficiaries protect and grow their assets after receiving a settlement.
1. Understand the Terms of Your Settlement
Before making any decisions, understand what you're receiving and any restrictions or conditions. Is the payment a lump sum or a series of installments? Are there tax considerations? Legal and financial professionals can help clarify your rights and responsibilities.
2. Create a Budget That Reflects Your Goals
Budgeting is your first line of defense. It helps you avoid emotional spending and allows you to allocate your funds toward essentials, savings, and future goals. Think short-term (housing, bills, emergency fund) and long-term (education, retirement, legacy).
3. Pay Down Debts Strategically
If you have outstanding debt, now is a smart time to evaluate repayment options. Clearing high-interest balances may offer peace of mind and greater financial flexibility—but it’s important to balance this with saving and investing priorities.
4. Build a Savings and Investment Strategy
Once immediate needs are addressed, look for ways to make your money work for you. Consider a diversified investment plan, savings accounts, or certificates of deposit. Thoughtful investing can help grow your wealth over time, but should be tailored to your goals and risk tolerance.
5. Be Aware of Tax Implications
Depending on the source of your settlement, you may face income, estate, or capital gains taxes. A tax advisor can help you stay compliant and explore strategies to minimize your tax burden now and in the future.
6. Consider Estate Planning Tools
Your financial life now includes new assets—so protect them. Work with an advisor or attorney to draft or update a will, explore trusts, and designate beneficiaries. These tools help ensure your intentions are honored and your loved ones are supported.
7. Evaluate Legal Protections for Your Funds
Some legal structures may protect your settlement from creditors, lawsuits, or divorce. If these concerns apply, ask a legal professional whether asset protection strategies like trusts or structured accounts may be appropriate.
8. Plan for Retirement and Long-Term Care
Use this opportunity to consider your long-term financial health. Could your settlement help fund a retirement account or cover potential care needs later in life? Planning ahead can reduce stress and increase options down the road.
9. Safeguard Your Privacy and Security
Sudden wealth may increase your exposure to fraud or unwanted attention. Protect your financial accounts, limit who you share personal details with, and watch out for scams. Consider credit monitoring or identity theft protection services for added peace of mind.
10. Continue Building Financial Literacy
Financial confidence comes from education. Explore The MyMoney Five framework to guide everyday decisions: Earn, Save & Invest, Protect, Spend, and Borrow. And do not hesitate to reach out for help—advisors are here to support you.
Want a quick way to put these tips into action?
Download the Beneficiary Settlement Checklist for a step-by-step guide to help you get started.
BONUS: Should You Consider a Structured Settlement?
If you have the option, choosing a structured settlement—instead of a lump sum—may offer long-term stability through scheduled payments. These arrangements can help safeguard assets, cover medical expenses, and even provide lifetime income for beneficiaries.
Advisors may recommend structured payouts in cases involving personal injury, medical malpractice, or loss of earnings. These options are worth exploring if you prefer predictable income and want to avoid the risk of overspending.
Final Thought: This Is Your Foundation—Not a Lottery Win
You deserve financial peace of mind. With clear goals, good habits, and the right support, your settlement can be more than a one-time event—it can be the beginning of a more secure financial future.
Take the first step toward financial wellness. Contact a Midland Wealth Advisor today.
Prefer something you can keep on hand?
Download the checklist as a companion to this article—and start building your financial wellness today.
