Listen on Apple Podcasts, Spotify, Buzzsprout, online, or search ‘The Stewardology Podcast’ in your favorite podcast app.

 

Picture this: you’re sipping your coffee, scrolling through your phone, when a notification pops up—congratulations, you’ve just won the Powerball! A Huge financial windfall!

Your heart races, your palms sweat, and your mind spirals into a montage of private jets, beachfront mansions, and maybe even a gold-plated toaster for those extra-fancy breakfasts. But before you start Googling “yacht prices,” let’s hit pause and talk about what to do when a financial windfall—whether it’s a jackpot, an inheritance, or a surprise settlement—lands in your lap. Because, believe it or not, sudden wealth can vanish faster than your New Year’s resolution to hit the gym.

Financial windfalls are more common than you might think. Today, let’s explore practical, biblically grounded tips to manage windfalls wisely.

Disclosure: We DO NOT recommend playing the lottery or taking part in any type of gambling.

Common Sources of Financial Windfalls

Windfalls can come from various sources:

  • Settlements (legal or insurance)
  • Bonuses
  • Sale of an appreciated asset
  • Inheritances
  • Divorce or alimony settlements
  • Stock options, RSUs, IPOs
  • Lottery or gambling winnings

How to Handle a Financial Windfall

Let’s break it down by type of windfall.

Windfall Type #1: Inheritance

Real Estate
If you inherit a house or land, consider your options. Selling it can provide a large sum with minimal taxes, or you might convert it to a rental property. Keep in mind the complexity of managing multiple properties—travel, repairs, and taxes can add up. Always get the property valued upon inheritance to establish a new cost basis.

Cash or Insurance Death Benefit
Insurance proceeds are typically tax-free. Use them to pay off debt, build an emergency fund, contribute to retirement accounts like IRAs or 401(k)s, and invest the rest. Proverbs 21:20 (NIV) says, “The wise store up choice food and olive oil, but fools gulp theirs down.” Use these resources wisely to build future security.

Investment Accounts
Inherited investment accounts often come with a stepped-up cost basis, so you can sell with minimal tax impact. If you keep them, rebalance to match your risk profile. Proverbs 24:3 (NIV) reminds us, “By wisdom a house is built, and through understanding it is established.” Use discernment as you manage these assets.

Inherited IRAs
You’re required to take distributions, following the 10-year rule—by the 10th year after inheritance, the account must be fully distributed. For traditional IRAs, consider timing your withdrawals to minimize taxes. Roth IRAs offer tax-free growth, so let them grow as long as possible. Proverbs 22:3 (ESV) says, “The prudent sees danger and hides himself, but the simple go on and suffer for it.” Strategic planning with inherited IRAs protects your future.

Annuities
Qualified annuities (inherited through retirement accounts) follow the same 10-year rules. Non-qualified annuities use last-in-first-out taxation, meaning gains are taxed first as ordinary income. Proverbs 21:5 (ESV) says, “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” Work with a professional to optimize tax planning for these assets.

Windfall Type #2: Legal Settlements

Tax-Free Settlements
Use these like an inheritance: pay off debt, save, invest, and give generously.

Taxable Settlements
Factor in taxes before spending. Proverbs 3:9 (ESV) urges, “Honor the Lord with your wealth and with the firstfruits of all your produce.” Giving first sets the foundation for wise stewardship.

Windfall Type #3: Alimony or Divorce Settlements

Divorce settlements often involve real estate, cash, and retirement accounts (via Qualified Domestic Relations Orders). Remember to fund retirement for both spouses and consider long-term planning. Proverbs 27:12 (ESV) advises, “The prudent sees danger and hides himself, but the simple go on and suffer for it.” Thoughtful planning protects your future.

Windfall Type #4: Stock Options, RSUs, IPOs

  • Stock Options: Exercising them can create a big tax bill if sold too soon (short-term capital gains) versus waiting 12 months for long-term rates.
  • RSUs: These are taxed when they vest, not when granted. Plan ahead for a possible income spike.
  • IPOs: Shares can become very valuable, but they also come with major capital gains taxes.

Consider donating appreciated stock to charities or a donor-advised fund to offset taxes. Proverbs 22:9 (NIV) says, “The generous will themselves be blessed, for they share their food with the poor.” Generosity with your windfall can have kingdom impact and reduce tax burdens.

Windfall Type #5: Winnings (Lottery or Gambling)

Deuteronomy 23:18 warns against using ill-gotten gains in God’s house. If you do end up with lottery or gambling winnings, pay off debt first and commit to staying debt-free. Proverbs 13:11 (ESV) says, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” Sudden wealth is often lost quickly without discipline. At the end of the day, we do not believe gambling is right or good.

General Principles for Managing a Financial Windfall

Sudden wealth tests our stewardship. Proverbs 13:11 reminds us that wealth gained slowly through discipline and work builds lasting value. For smaller windfalls (less than $1 million), work with a financial advisor to pay off debt, save, invest, and give. For larger windfalls ($1 million to $15 million), incorporate estate planning and tax strategies with trusted advisors. Super-large windfalls ($15 million+) require a team of financial advisors, accountants, and lawyers to navigate estate taxes and legacy planning.

Closing Thoughts: Wisdom for Every Financial Windfall

A financial windfall can feel like a golden ticket, but as Proverbs 16:9 (ESV) says, “The heart of man plans his way, but the Lord establishes his steps.” Don’t let excitement or greed drive your decisions—pause, pray, and plan. Seek counsel from wise, biblically grounded advisors, and honor God with your wealth through giving, saving, and careful planning.

By prioritizing stewardship and seeking godly counsel, you can turn a windfall into a legacy that blesses others and honors the Lord.

 

Next Steps

 

 

Material presented is property of The Stewardology Podcast, a ministry of Life Financial Group and Life Institute. You may not copy, reproduce, modify, create derivative works, or exploit any content without the expressed written permission of The Stewardology Podcast. For more information, contact us at Contact@StewardologyPodcast.com or (800) 688-5800.

The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

Securities and advisory services offered through GWM, Inc Member FINRA/SIPC