Wealth preservation requires a holistic approach that includes prudent financial planning, strategic investment strategies, and an understanding of risk management. Effective wealth preservation strategies can help high-net-worth individuals navigate economic uncertainties and protect their hard-earned assets for generations.
Diversification of Assets
Wealth preservation is an ongoing process that requires foresight and strategic planning. From saving for emergencies to diversifying your investment portfolio, an experienced financial professional can help you create a plan aligned with your family’s needs.
Diversification helps mitigate risks and stabilize portfolio performance over time. Spreading investments across several asset classes reduces the impact of a single decline in a particular sector. Additionally, incorporating product types like pensions and annuities provides income streams that are guaranteed for life, mitigating exposure to market risk.
Asset protection trusts (APTs) — also known as domestic asset protection trusts — are a type of trust that shields your assets from creditors. A common concern is that a creditor, such as a business bankruptcy or lawsuit, could seize your assets. Michigan recently passed legislation allowing APTs, commonly called self-settled asset protection trusts (DAPT). These trusts allow you to place your assets into an irrevocable trust and separate them from your assets.
Tax Efficiency
In a world where government debt and inflation are rising, preserving wealth in the face of economic uncertainty is more important than ever. A comprehensive wealth preservation strategy can protect family assets from potential risks, minimize taxes, and secure a legacy for future generations.
This process requires foresight, strategic planning, and astute decision-making. Families can safeguard their hard-earned assets by implementing the five key strategies of creating a financial plan, saving for emergencies, diversifying investments, investing in insurance, and optimizing tax efficiency.
Insurance
As a part of wealth preservation strategies, establishing appropriate levels of insurance coverage can protect against potential risks. This can include life insurance and disability coverage, as well as property and business insurance. The insurance strategy should also consider the risk of lawsuits and market volatility.
Setting up an effective business succession plan for a family’s private businesses is also prudent. Incorporating these strategies will help ensure a family’s financial stability for generations.
Wills
Most wealthy individuals have significant money they intend to leave behind for their children and other descendants. These assets must be protected from taxes, market downturns, inflation, unexpected lawsuits, and health issues. This is the purpose of wealth preservation strategies.
One of the most important wealth preservation tactics is to monitor spending. Creating a budget that can cover your necessary expenses and activities is an easy way to cut down on discretionary spending. This is especially important during times of market volatility and global uncertainty.
Another commonwealth preservation strategy is diversifying your assets. Keeping a diversified portfolio can help you avoid losses from the downturn of a single asset class or market sector. It can also help you avoid paying capital gains tax on publicly traded securities with increased value.
While many people assume that making a will is enough to protect their assets, you can take many more steps to preserve your family’s wealth and ensure it goes to the right person when you pass away. This includes diversification of investments, monitoring risks and investments, maintaining a cash reserve, insurance, and effective estate planning.
