When asked how he had blown his newfound wealth, football legend George Best famously quipped: “I spent a lot of money on booze, birds and fast cars. The rest I just squandered.” Tales of lottery winners who burned their way through their windfalls by making poor choices and ruined their lives in the process are the stuff of many a racy tabloid feature. It’s a surprisingly common phenomenon.
In the US, the Certified Financial Planner Board of Standards reports that a third of lottery winners declare bankruptcy, ironically ending up worse than where they started. The adage about being careful what you wish for comes to mind but a cool head and professional advice can mean that a large financial windfall may result in life-changing benefits for those lucky enough to be in receipt of one.
Big lottery wins by their nature are rare but significant inheritances are common and are the main source of financial windfall for most people.
Inheritances have been augmented by a surge in property prices in recent years. The 2025 budget increased personal Capital Acquisition Tax (CAT) allowances to €400,000 over a lifetime in the case of a transfer between a parent and a child; in the case of family members such as a sibling or an aunt, uncle or grandparent, the allowance is €40,000; while in other cases it is €20,000. Once the allowance is exhausted, the balance is taxable at 33 per cent.
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The prompt filing of a CAT return to Revenue with an arrangement to pay the tax liability by the due date is the first thing anyone in this position should arrange and in assessing their newfound wealth, recipients should think in terms of the net value after tax rather than the gross sum they have received.
This requirement underlines a broader need to seek professional financial advice when in receipt of such sums. Cian Morrisey, principal of Morrisey Wealth Management, agrees that getting advice from a qualified financial planner is vital.
“The first thing should be to assess your financial position before the windfall by asking questions like do you have any emergency savings or do you have expensive short-term debt? Other questions to look at include how many years you have to left to pay on your mortgage, if you have one, and to assess your goals, such as becoming debt free, retiring early or helping family members, for example.
“This is all easier if you expected the windfall as you would have time to digest the fact that you have a life-changing sum of money. If it was unexpected, the most I would advise a client to do is to pay off expensive short-term debt, if they have any, and then park the funds in a deposit account for six to 12 months while they plan what to do with the money.”
Online banks generally offer better rates of return than legacy institutions at the moment. Bonkers.ie provides a handy, regularly updated reference point for the best offers, depending on the sums and levels of access required.
However, leaving all your money on deposit in the longer term is not a good option in any case as the level of returns is unlikely to keep pace with inflation, let alone beat it.
Once you know what your goals are, the main consideration should be to develop a diversified investment strategy. Morrissey recommends either a managed fund or a passive one that tracks markets such as the S&P 500, and advises checking that the fund has a low changing structure to maximise your return.
Fearghal Lawlor, head of business development with Cantor Fitzgerald Asset Management, says sudden wealth, whether from winning the lottery, an inheritance, or any unexpected financial windfall, can be both exciting and overwhelming.
“A greater number of individuals will see themselves benefit from some sort of financial payout in their lifetime. This is especially true when considering that increased generational wealth is expected to be passed down over the coming decades in what is often referred to as the great wealth transfer.”
Lawlor agrees that a cool head is required and that beneficiaries should pay down any expensive debt and set aside an emergency fund before carefully considering longer-term objectives such as retirement, home purchase or funding education.
Investment goals should be split between short-term and longer term goals. Short term goals of one to three years may need more conservative options while long term goals can generally handle higher risk levels, he says.
One of Lawlor’s top recommendations is a multi-asset fund, which is invested in a diverse range of asset classes such as equities, bonds, real estate, commodities and alternative investments.
“One of the core advantages of a multi-asset fund is diversification. By spreading your investment risk across various asset classes, you can reduce the risk of relying on one asset class, such as stocks, performing poorly. Different asset classes tend to perform differently in various economic environments, helping balance overall risk.”
Diversification is a common refrain among financial advisers and one that seems particularly appropriate in the current environment. All of the historical evidence shows that investment in equities outpaces any other asset class over a long term horizon. The average return for the S&P 500, adjusted for inflation, is around 7 per cent annually over the past 30 years. Hidden within that are rollercoaster swings. The same index returned 23 per cent last year, on top of a 26 per cent jump the previous year, in one of the longest bull runs in history.
Corrections and crashes do occur too, however. And sometimes with little warning. It took the market six years to recover from the dot-com collapse of 2000 and the 2008 crash. Timing entry into and exit from the market is notoriously difficult and often painful.
When it comes to extreme prudence with windfalls, Money Doctor John Lowe, who has advised several lotto winners, has one very simple piece of advice if your numbers ever come up. Lowe advises lottery winners to get all their money banked safely first as the Government will guarantee lottery win funds for six months while the lucky winners figure out what to do with it.
One of the best rates of no-risk returns for the cautious is to invest in a state savings product such as a National Solidarity Bond. A 10-year investment will yield 22 per cent tax free – equivalent to a gross annual rate of 3 per cent, he notes.
Thereafter, there are any number of options for those willing to take some risk, including index or managed funds and ETFs, precious metals such as gold, silver and platinum or fine art, cryptocurrency, antiques and wine. Again, diversification and taking advice from a qualified financial adviser is always a good policy, he says.
While a George Best-style lifestyle is never advisable, it is important to enjoy the good fortunate that has come your way and live a little too. As Lawlor advises: “Set aside a portion of your windfall for fun experiences or luxuries you have always dreamed about, whether that’s travel, a new car or a hobby you are passionate about.”
