Are you expecting to receive a large sum of cash in the near future? Perhaps you own a business and are thinking of selling it, or you are a key person in a business who will cash in on a merger, acquisition, or IPO.

Whatever the case, you likely have spent a considerable amount of time and effort growing the business. Now, you need to spend some time and effort devloping a clear plan for how to handle the influx of cash and what to do next.

While it may seem straightforward, i.e. your bank account balance will simply be much larger, there are actually quite a few complexities to navigate around receiving a sudden large sum of money. 

Such an event will not simply be a financial change, but one that will touch all aspects of your life. This may pave the way for new possibilities, but it also brings about new challenges. 

Here is what to know both before and after a major liquidity event.


When to Start Planning

Waiting to plan until after you receive your cash could be a major mistake. Start planning at least 18 months before the liquidity event if possible. Some recommend planning up to 24 months out. There is much more to plan for than just receiving an influx of money in the bank. This planning includes assessing the goals you are trying to achieve personally, professionally and maybe even philanthropically, cash flow planning, tax planning, and legacy planning.


Establish An Effective Team

Establishing the right team of highly trained professionals to help you navigate the path ahead of you is in your best interest. First, consider using a financial advisor to help you develop a current and future plan for the money you receive.

Next, having a tax advisor to help you plan for tax consequences resulting from the event and future plans, like retirement, will be beneficial. Waiting until it is too late to plan could mean missing out on several tax-saving opportunities.

Finally, consider working with an estate planning attorney to ensure all of your affairs are in order and your plan for the future and for your legacy is secure. Make sure all the members of your team are communicating with each other and are on the same page.


Reassess Your Goals

It’s no surprise that major liquidity events are sometimes difficult to navigate for entrepreneurs and key executives, simply because it involves their company which has likely been a significant part of their life. Perhaps you can relate. Just reaching the point of selling your company, or shares in your company, is not always a smooth path emotionally. You’ve invested time and energy, likely over the course of many years, to grow your business. Letting go or changing roles is not easy. 

However, realizing the fulfillment of a major goal like this is exciting and should be celebrated. It may represent the end of one lifelong goal, but it also paves the way for new and perhaps bigger goals. 

Take time to appreciate the road to get here and think about the future. What does the road ahead look like? Perhaps you would like to:

  • Preserve family wealth.
  • Invest in your children’s futures, like education and trusts.
  • Improve your local community.
  • Give to causes and charities.
  • Start a new business or venture.

As you can see, the options are plenty, but each choice also benefits from a professional approach, especially when you consider cash flow and tax planning. Working with an experienced team of professionals can help you navigate your goals and give you a clear path to see them realized with maximum efficiency and impact.


Have a Backup Plan

While there may be a clear plan for the liquidity event and to allocate your influx of cash toward new goals and objectives, there is also a need to plan for the unexpected. A lot can happen in the months leading up to a major liquidity event, and it’s important to assess all possible outcomes and plan accordingly. 

For instance, the plans might not go through as anticipated. Unforeseen litigation or other issues could delay a sale or IPO, or your payout sum may end up being less than you originally planned.

Work with a financial professional to create a plan for these contingencies. This will help you make wise decisions and to take the best path forward. Plan for but avoid executing on major decisions until after everything is finalized. You’ve worked hard to get to this point and there is a lot at stake surrounding this event. 


What to Do After the Liquidity Event

Once the liquidity event is complete, it’s time to execute on your plan. This is where the help of a financial professional will be invaluable. Put your wealth to work for you right away and start executing toward your new goals. 

This may include:

  • Setting up retirement accounts.
  • Setting up trusts and endowments.
  • Planning for large purchases.
  • Gifting money to charities or family.
  • Determining how money will be divided among family through estate planning. 
  • Wealth management and growth planning. 
  • Tax Planning.


The Personal Side of Life after the Event

While the financial side of things is necessary to plan for, you must also understand the new roles into which you are stepping personally. You might be leaving a CEO or founder role, or transitioning out of a leadership position in which you invested much of your time and energy. This type of change often comes with an identity shift. Without the right perspective, it can be a difficult road to navigate

This speaks to the importance of setting new goals and adjusting to new roles, both in work and family life. Working with a financial advisor who understands both the financial and personal impact of a major liquidity event will help you transition smoothly and confidently into this new season of life. An advisor can help you plan for your next adventure, transition into retirement, or help you transition into your next role, if that’s what you desire.


Navigating Friends and Family

It’s important to have a clear understanding of how your new additional wealth may impact your relationships and how you may be perceived by others as well. You may have a new-found ability to assist family members or friends financially. You may also start attracting attention from those looking to target you for a potential lawsuit or other opportunities. 

Having a solid plan for your wealth and allocating it accordingly will help circumvent much of this. It’s necessary to set clear boundaries, adhere to those boundaries and properly assess and manage risk. Generosity within boundaries can be a wonderful attribute, but always apply wisdom to your financial matters and work with a financial professional who can help you make the best choices. 


A Professional Approach

If you are facing a major liquidity event soon, start planning now and seek professional guidance. There are many complexities awaiting the road ahead and much to prepare for.

At Prosperity Road, we can help you make the right decisions for you and your family, manage financial risk, take advantage of new opportunities, and preserve your wealth for generations and causes to come. 

Schedule a consultation today and make sure you’re making the best financial decision for you, your family, and your legacy.