Who hasn’t dreamed of a huge bequest from a long-lost uncle? It has happened, but in real life windfalls are more likely to come from parents or grandparents, the lottery or a lawsuit settlement.

Your first impulse might be to live it up — tour Europe, buy a big boat, new home or vacation place. Financial advisors say, however, that most people are better off investing a windfall for retirement, college or a rainy day. And, they say, many clients aren’t equipped to handle a flood of money.

“Sudden wealth — the kind resulting from the sale of a business, personal injury settlement, inheritance or even winning the lottery — often presents the recipient with a set of challenges for which they may be unprepared,” says Stephen C. Krauss, senior wealth advisor at Tompkins Financial Advisors in Ithaca, New York. “My own experience with suddenly wealthy clients has been that they are their own worst enemy.”

In many cases, there is less money to leave for heirs than many might expect, says Charles F. Freeman, president of AdaptFirst Investments in Greensboro, North Carolina.

[See: 7 Investment Fees You Might Not Realize You’re Paying.]

“Due to increasing longevity, older generations are spending their savings on increasing health care costs and maintaining their lifestyle,” Freeman says. “This leaves less money, if any, to pass on to the next generation. Therefore, it is also less common now that a windfall received, such as an inheritance, will significantly change someone’s financial plan.”

Still, big inheritances do happen, as do lottery jackpots and legal settlements, so experts urge clients to think hard about various ways to handle sudden wealth.

Splurge! Well, not exactly. Many advisors suggest taking a close look at how the windfall might affect the recipients’ lives going forward, then designating a portion for investing and a portion for fulfilling some long-standing desires. Some indulgence can help dampen the urge to fritter away a valuable asset.

“For smaller windfalls, we generally recommend some splurging, some reduction of debts, and strengthening of [investments to increase] future income levels,” says William Stack of Stack Financial Services in Salem, Missouri.

Freeman says many people have dreams they could not afford before like a boat, second home or travel.

“A windfall can help realize experiences that will enrich a client’s life forever,” he says, “so I feel it is important to talk about those things and find a way to realize some of those dreams while supporting their lifestyle, both now and in retirement.”

One step, experts say, is to look carefully at how money spent could reduce one’s way of life down the road. After all, a dollar invested today could grow to $3 to $5 in 20 or 30 years.

Though a radical change in lifestyle can be ill advised after a modest windfall, something like a huge lottery winning could cause a sensible lifestyle change, like moving to a gated community offering better security, says James Philpot, associate professor of finance and general business at Missouri State University in Springfield.

With more valuable possessions and a big financial account, it would also be wise to get more insurance, including liability coverage because people with deep pockets are targets for lawsuits, Krauss adds.

[See: 9 Things to Know About Robo Advisors.]

Consider taxes. An inheritance may not trigger a big tax bill, but gambling winnings and legal settlements generally do. So it’s important to set aside enough at the start to meet that obligation, remembering that a big sum will probably push you into a higher tax bracket.

“Significant new wealth often carries with it tax implications that clients had not experienced before that time,” Krauss says. “Financial decisions may be made without carefully considering the tax consequences, resulting in, at best, lost opportunities for tax efficiency and, at worst, penalties and fines.”

Pay debts. Paying down or eliminating debts can be a valuable investment, since every dollar that no longer incurs a 13 percent credit card charge is in effect, earning 13 percent. So start with the debts carrying the highest interest rate. Low-rate debt like a mortgage may be a lower priority, especially if you feel you could invest at a higher return than the loan rate, though reducing debt can make it easier to sleep at night and to borrow in the future. Just be careful not to run up those card balances all over again.

Philpot recalls a student who received a large settlement after a wage dispute with an employer.

“To the student’s credit, he used the money to prepay his debts, a student loan and car loan,” Philpot says. “This greatly accelerated his potential progress toward post-degree financial goals like home ownership, retirement, etc.”

Consider your heirs. Some or all of what you receive may eventually be passed down to your own children or grandchildren, so investigate the best way to do that. Even if you think you’ll spend it all during your lifetime, a heart attack or car accident could change things.

“It is very important for the client to have an updated will to reflect their new wealth status,” Krauss says. “Depending on the size of the potential estate, the client may want to establish a trust to ensure that their wishes are carried out by qualified administrators.”

Reassess investments. The asset-allocation strategy you had before the windfall may not suit your new wealth. Some beneficiaries may be more inclined to take risks in hopes of faster growth, figuring they can now handle a loss. Others may prefer the sense of security that comes from conservative income-producing investments, which may produce enough to live on after an infusion of new cash.

“It’s important to complete a new risk profile and maybe even assign different risk parameters to this part of the portfolio,” Freeman says. “The additional money could allow for investment into new areas of the market, or supplement an existing investment.”

But don’t rush to pour new-found wealth into the market, Philpot advises.

[See: 6 Reliable Dividend Stocks Paying Out for 100 Years or More.]

“Invest in a simple, low- or no-risk vehicle — and T-bills, money market fund, bank CD — for the first six months, until you have gotten back to emotional normality,” he says.

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5 Ways to Invest a Financial Windfall originally appeared on usnews.com