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Large Sum of Money KEY STEPS (won lotto, inheritance, business sale) - YouTube
Channel: Kent Cliffe
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in today's video what i wanted to do is
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go through step by step
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what i would do if i came into a
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significant and i mean significant
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amount of money i'm not talking one to
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two million i'm talking five ten
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million dollars plus i've been quite
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lucky that in my life i've met a couple
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of significant lottery winners
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i've also met countless other people
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which have sold businesses
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or real estate and have come into large
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sums of money but when you actually go
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online and look it up
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there is not a lot of information about
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what you should do
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and i thought i would create this video
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for two reasons
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two reasons not four reasons because
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it's a way of doing an open book and if
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the advice is bad you can call me out in
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the comments section
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the second reason is it is often a
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multi-year process to settle your
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structures and everything up correctly
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so what i want to do is simplify and
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just create a step-by-step process that
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you can follow in a couple of weeks
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to do what normally takes a couple of
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years it goes without saying that this
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is not any form of personal
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financial advice this is just general
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advice and
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by going past this point in the video
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you agree to be bound by the terms and
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conditions which have been linked in the
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description section of
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this video the first steps of what you
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must do is actually a list of things
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which you should not do once the money
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hits your bank account and step number
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one is
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quit your job if you want to take some
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time off to have a breather
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take leave you may stay with your job if
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you enjoy it
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or you might reassess things so this can
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be done at a later
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stage then despite all the excitement it
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is important not to tell anyone i'm not
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saying don't tell anyone at all
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but have a think about who you tell down
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the track and do it once the excitement
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settles
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if the payment is given to you on a lump
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sum or a terms basis so a lump sum is
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when everything gets given to you day
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one and a payout basis is it gets
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chopped up into installments and paid
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over time always
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always despite what the lottery blogs
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all say accept it in a lump sum because
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provided you do responsible things with
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your finances from day one
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you more than likely will be in a much
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better position long term
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then make sure that you host your
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checkbook or more figuratively your
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credit card stays in your pocket
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don't buy dumb stuff i'm not saying
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don't ever buy dumb stuff
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but buy stuff off the income stream from
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the capital that you've received
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not by the capital itself because it
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diminishes your ability to earn an
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income in the future
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and that rounds out the final point
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which is never give the principal away
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do not give it away to family do not
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give it away to friends i'm not saying
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don't give them money
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just don't give them the principle if
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you receive returns of that principle
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you can then for perpetuity give them
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money because it will never disappear as
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long as you're earning an
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interest or a return on that principle
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let me be clear on my never giving away
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principal principle
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basically you have a large sum of money
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and you are generating an investment
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return of it
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if you give away 20 30 or 50 percent of
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that principle you need to increase your
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returns by
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two times the amount of what you gave
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away so for example if you're generating
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a six percent return on 10 million
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dollars
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and you give away half of that 10
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million dollars that means for to
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generate the same return on 5 million
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dollars you need
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to generate six double at twelve percent
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to achieve the same gross return this
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means in the investment world you're
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taking more risk
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and the likelihood of losing that
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principle increases
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so what i would encourage you to do is
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to keep the principal
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get a fair return for your money and
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then give away the income because this
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way you'll have the money forever for
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generation
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after generation after generation
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whereas if you give away the principal
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it will come to an end at this point
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what a lot of people would say is do not
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do not trust a random dude like me off
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the internet go and seek
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professional advice and look i do
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encourage you to do that to a point
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but what i encourage you to do is a
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little bit differently firstly go and
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use some of the tools online to find a
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range of different independent financial
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advisors and speak to a couple up front
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don't tell them your exact situation
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around the windfall
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get an understanding of their fee
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structure how they do things and then
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after this point you can meet with them
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again geez if they want to charge you
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for a couple hundred bucks to meet them
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again that's fine
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and you can then tell them the full
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situation and see
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does their fee structures change who
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they are does the investment methods
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change
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and how is it different then i would
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question them on why it has changed and
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make sure you hold them accountable
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this tip goes for all advisors whether
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it be lawyers for estate planning
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whether it be accountants for
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structuring whether it be financial
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planners and anyone else that is giving
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you that advice
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then if you haven't already call up your
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bank and set up a high interest savings
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account if you haven't got the money
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already give the bsb an account number
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of the high interest savings account the
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reason for that is the interest accruals
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as soon as the money is transferred to
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that account
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rather than getting routed through your
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everyday account that you use
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the other thing is don't be too stressed
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as to if your bank has the best rate
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because this is only going to be a
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temporary holding place for the money
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until you have set up the correct
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structures which i will discuss
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a little bit later in this video while
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the money is in your high interest bank
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account the next thing which you would
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be encouraged to do
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is speak to an accountant and it's
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similar to a financial planner
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chat to a different couple of
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accountants get an understanding of what
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they do
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and the costs involved it's worthwhile
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learning that if you have an existing
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account and that might be okay but if
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they do
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basic tax return stuff this might not be
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suitable to set up all the correct
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structures
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an account which might be more suited is
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a small business account whereby they
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understand structuring
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they understand trusts and a range of
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other matters the way i do this is to
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type into google small business
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accountant and i would look at page two
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or three of google
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the reason for this is page one is crown
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full of accountants that are hungry for
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business they're growing
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and often they char they pay for
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marketing they pay for seo and that gets
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them to the top of google
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this also means that their fees have to
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recoup the cost of marketing
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whereas on page two or three these
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accountants often produce good content
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they still rank fairly high in google
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but you may find that their fees are
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less expensive
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the other pro tip for financial planners
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and accountants is to avoid groups
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and what i mean by that is instead of
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just being really good in accounting and
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that's all you do
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they start to group into other
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professional services so you have an
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accounting that also does financial
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planning which also does mortgage
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broking
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and the reason for this is they'd
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commonly cross refer you between those
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individual services that they offer
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what i would encourage is a better way
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to assure accountability is have an
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independent financial planner to an
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accountant
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and this way you can ask questions to
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one contact and
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confirm those questions and answers with
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the other contact
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and the final final final final thing to
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do while you're at the account
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is to subscribe to my channel and share
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this channel to them
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because this way it will give me a warm
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fuzzy feeling of another subscriber
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which will encourage me to make more of
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this content once you select an account
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one of the first discussions that
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they'll have with you is setting up a
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structure
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and one of the most common structures
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that they set up is a discretionary or
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family trust
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you could be trustee of this trust
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personally or you can set up a company
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that acts as a trustee of the trust
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the accountant can discuss with you the
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pros and cons of each of these options
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if your accountant has that you set up a
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company as trustee
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for your family trust i've got a couple
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little extra tips general tips that i
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want to share with you firstly naming of
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that company and trust
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i would go for a fairly mundane basic
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name that doesn't necessarily relate to
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you personally and the reason for that
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is
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if you're in shares and property and
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other investments this can be commonly
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public record which means people can
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track it back to your own personal name
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now i know you can pull company records
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and find out who the directors
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and shareholders are but by having a
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company name it just creates one extra
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added layer of privacy
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the other thing worth mentioning is
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around directorships and shareholders so
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if your spouse and you both want to be
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directors on the family trust
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trustee this means you'll both need to
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execute every single document every
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single bank account
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every single tax file every single
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everything together and for some people
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that's fine
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it's commonly easier to have one sole
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director that executes everything that
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company does and is legally liable for
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decisions that that company undertakes
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and then you have a will set up where
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you deal with situations
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in the event of death or incapacitation
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of that director
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also while we're setting up the family
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trust it may be also worthwhile setting
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up a different email address which
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relates solely to the family trust
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this way all your documents are stored
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in one place and also it creates another
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layer of privacy
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you could also consider a po box and
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this way your address is kept private
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too
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this is the perfect segue onto my next
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topic which is estate planning and i
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don't care how boring this topic is or
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how fit you are you need to seriously
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consider it and it's not just for you
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it's also for your spouse and if you
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have adult kids
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and they're a beneficiary on your will
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and they have dependence they need to
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consider their estate planning as well
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what is estate planning well it relates
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to wills testamentary trusts enduring
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power of attorneys
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and the succession plan of your family
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trust and any other entities which you
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have set up
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because we're dealing with a bit of
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money estate planning can be a little
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bit more complex because not only you
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have more structures now set up
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also you have to consider the event of
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waterfalls so not just what happens to
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you
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but what happens to you and your spouse
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if you have adult kids and they have
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dependents what happens if you
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your spouse and also one of the parents
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of the kids
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disappear because ultimately you want to
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make sure that you are setting it up in
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a way that you can look after future
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generations
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any lawyer can write a will but what i'd
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encourage you to do is speak to a
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specialist lawyer that deals solely in
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writing wills
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and the reason for this is they're
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familiar with how wills should be
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structured and also they do it day in
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day out the other thing is they often
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have a structure and for this reason
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it's often cheaper
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to get a specialist will provide over
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just a general lawyer to write up a will
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on your behalf
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it's common for will specialists to
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provide you a fixed fee quote up front
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rather than charging you on an hourly
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rate basis and i encourage you because
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you are dealing with a bit of money
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this is not a space to diy because there
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is a lot of
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interrelated factors that can impact
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wills
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and now that there's money involved
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there is a catalyst or a reason for
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people to consider challenging that will
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now that you've got your accounts
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structures tax file number and wheels
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you can start considering what you
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actually do
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with that money and the first thing to
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consider is setting up a bank account in
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the trust and moving it out of your
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personal name
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into the trust so let's get into setting
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up the bank accounts
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me being super paranoid i want to chop
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my money up in at least
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four different ways what i would
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consider is a cash account a six month
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term deposit a nine month term that was
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it and a 12 month term deposit
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the reason why you want to get term
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deposits and term deposits with longer
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terms is because firstly you're not
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going to deploy all the capital in day
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one
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so this gives you a staggered cash flow
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and the second reason is you get higher
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rates on longer term deposits and
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this means that you can slightly blend
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up your returns on money which you
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aren't going to need straight away
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also you don't want to be setting up
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four different accounts with one bank
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you want to set up one account with four
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different banks
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the reason for this is because the
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government only guarantees 250 000
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with one bank the other thing which you
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need to be mindful of in australia a lot
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of banks like st
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george is owned by westpac for example
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and bankwest is owned by cba
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so finder has actually got a really good
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tool to
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tell you which banks are related
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subsidiaries to their parent company
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that is important because the 250 000
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guarantee which the government gives
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only relates to one parent entity so if
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you had money with westpac and st
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george and both of them went broke you
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would effectively only get 250 000
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from one of those banks how do you pick
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the banks well google term deposit
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comparison websites
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they will give you an understanding of
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which banks are offering the best rates
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for
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different term term deposits and cash
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accounts so the fine print can go two
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ways firstly some banks offer a bonus
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for more money
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and some banks actually penalize more
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money so just make sure that the rate
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that the bank is offering
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is correct and accurate for the amount
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of money which you are considering
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depositing
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all of those certified id's which you
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got one of the accounts to do at the
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start is coming in handy now because the
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banks are going to require them to set
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up all of the bank accounts while you're
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sending off all this money to different
[713]
term deposits the next thing you want to
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do is put up calendar reminders about a
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week out from when all these term
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deposits expire because
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if you let them expire and don't tell
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the bank on what you want to do with the
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money
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it will often sit with the bank at a
[726]
significantly reduced interest rate
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the next administrative task is setting
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up a portfolio tracker
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basically it's a complicated word for an
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excel document which outlines
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what the investment is how much is
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invested who's the key point of contact
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to action anything about that investment
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any notes that relate to it and a review
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date a day at which you're going to
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review that investment again
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the reason being is if you've got 10 or
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20 investments it can be quite hard to
[752]
manage it
[752]
and also if something happens to you
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someone can step into the portfolio
[755]
quite quickly and manage it on your
[757]
behalf while you're in excel the next
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thing you want to do is work out all
[760]
your assets
[761]
such as your house car superannuation
[763]
etc and your liabilities personal loans
[765]
credit card
[766]
car loans whatever it might be so you
[768]
know exactly what all your liabilities
[770]
are once you have all of these
[772]
liabilities in front of you
[774]
the next thing you want to do is call up
[775]
the credit providers ask them a couple
[776]
of things firstly the interest rate
[778]
they're charging you
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then you want to ask them if there's any
[780]
early repayment fees and finally
[782]
if you have to pay the interest till the
[784]
end of the term or does the
[786]
interest end today if you pay off the
[787]
loan today because
[789]
in car loans and a lot of other fixed
[791]
term loans it's quite common that no
[792]
matter how early you pay off the debt
[794]
you will still then have to pay the full
[796]
interest till the end of the term
[798]
so there's no point in that money
[799]
leaving your bank account not owning
[800]
your interest and you're also paying
[802]
them the privilege of them getting their
[804]
money sooner the final bookkeeping
[805]
exercise is to go back through your last
[807]
12 months of spending and work out how
[810]
much you actually spend because it's
[811]
quite
[812]
common to have crete basically as you
[814]
have more money you spend
[816]
more money and this is an exercise in
[818]
checking yourself before you wreck
[820]
yourself because as people have more
[821]
money
[822]
each consecutive year they spend more
[824]
and spend more to a point that their
[825]
spending is unsustainable
[827]
now that you have all your debts in
[828]
front of you it's worthwhile paying back
[830]
any debt that doesn't have any early
[831]
repayment penalties as well as any debt
[833]
you don't have to pay the interest to
[835]
the end of the term
[836]
with your mortgage it's worthwhile
[837]
discussing a few extra points firstly
[839]
with fixed rate mortgages it's more than
[841]
likely you'll have to pay the interest
[842]
off till the end of the term and for
[844]
that reason it's probably not worthwhile
[846]
paying
[846]
it off sooner if you have an offset
[848]
account or access to an offset account
[851]
it might be better to use your money to
[853]
fully offset
[854]
the offset account this way you're not
[856]
accruing interest but
[858]
there will still be fees for having that
[860]
facility open the benefit is you'll be
[862]
able to draw that money back out of your
[864]
property
[865]
and do things with it should you want to
[867]
at a later date
[868]
whereas if you pay off the facility in
[870]
full this means you'll need to re-apply
[872]
for a loan if you want to draw out some
[874]
money from your property
[875]
at this point you've got your structures
[877]
set up correctly it doesn't matter if a
[879]
bus hits you
[880]
and you have your money defensively put
[882]
into a range of different banks
[884]
you're ready to start considering
[886]
investing so
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until you find that great next
[889]
investment
[890]
or my next video best of luck and
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goodbye
[905]
you
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