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High Net Worth Investors and Asset Protection Strategies

High Net Worth Investors and Asset Protection Strategies

14 Oct 2022

Those of us who are fortunate enough to have amassed a significant amount of wealth can sometimes be tempted to rest easy. However, this is a self-deceiving mindset that can lead to financial ruin, even in calmer economic times. During inflationary periods, the potential for costing ourselves wealth through carelessness can get even higher. 

This article discusses some of the ways high net worth individuals can protect their assets, avoiding some common mistakes others have made. They are especially important for those who intend to leave a monetary legacy for the next generation.

The following topics are discussed in this article:

  • The Danger of Complacency
  • Your Taxes Need Planning
  • Safeguarding Your Legacy
  • A Fiduciary’s Advantage 

The Danger of Complacency

Many financially independent people have worked for years to get where they are. Meanwhile, others have been born into wealth through a family’s financial legacy. In each case, assuming that your money cannot run out can be a self-destructive mistake. There is no need to physically sit on top of stacked cash, but if you keep an eye on your wealth, you are generally more likely to keep it. 

Banks normally generate monthly statements detailing your accounts’ activity—because no one wise deposits their savings and then wanders off, never to enquire about them again. Similarly, while investing is a long-term endeavor, you should at least be checking on your assets annually. In fact, you need a plan in place for properly protecting them (ideally, before economic storms roll in). This is a critical component of managing your wealth. 

Investments often serve as the foundation of someone’s overall net worth. However, without proper maintenance of your portfolio, its assets are not guaranteed to be there when you need them. This makes establishing a plan for how they will be managed and protected over time a vital necessity. You may want provisions to keep them from falling into the wrong hands after your passing, as well. 

Your Taxes Need Planning

Even the affluent have to pay taxes. In fact, the IRS has been known to single out occupants of higher tax brackets for audits. Thankfully, although we have no option to refuse, we are at least afforded choices with regard to credits and reduction strategies. Tax planning boils down to analyzing your financial plan in order to ensure that every element works in sync for the goal of getting what you have to pay as low as possible.

It is not instantaneous. It has to be done over a length of time; years or even decades, ideally. Nevertheless, as long as you stay in compliance with the U.S. tax code, tax planning is perfectly legal. This leaves much of your financial future in your hands.

As a result, an analytic approach focused on maximizing credits (sometimes referred to as tax “breaks”) and other opportunities can be leveraged. Especially when this is done professionally by someone like a financial advisor, you can complete each tax year with the lowest liability (in other words, owing the least money) necessary. Do not underestimate the importance of this.

Taxes are a major factor in the amount of money you will have to live on in retirement—and therefore, the lifestyle in which you are likely to spend your golden years. Too few people understand that being comfortable now does not automatically guarantee a white-glove retirement. Those whose wealth management lacked planning, particularly with regard to taxes, have been known to have to sell off property and downsize, simply to ensure keeping their bills paid during retirement. 

That is why we emphasize the need to start strategizing your taxes proactively, far ahead of retirement. McGervey Wealth Management can help you ease the tax burdens that sometimes plague retirees (which is why we are known as a financial planner in the Akron and Canton OH area). Nevertheless, the most significant savings from reduced tax liability are only available as fruit from long-term planning. Put another way, the sooner you begin, the less taxes you should have to pay, overall. 

For example, high net worth investors may want to consider tax-loss harvesting, a strategy that involves selling investments at a loss. The idea is to offset the amount of capital gains you are assessed for on other, more profitable asset sales. However, it is only one of multiple tactics that may be applicable to your financial situation.

Safeguarding Your Legacy

Remember the reference above of provisions to keep your estate from falling into the wrong hands? Unfortunately, there are many threats potentially jeopardizing your ability to pass on what you have built. For example, if you die without a will or a trust, probate could cost thousands of dollars (and take months or even years to complete). 

It can get worse if no one capable of managing your finances after death, such as an adult child, is named in your will: The savings and assets you intended for loved ones could be exposed for collection by creditors or the government. This can happen to an estate even years after someone’s death occurs. Unless you plan to donate all your assets to your local municipality when you die, that is not a good outcome. 

Wealth is more than just money. In addition to the traditions it can help a family preserve, it is about the freedom to live the life you want—and leaving a legacy of similar independence for your descendants. This makes an estate plan essential for protecting this important aspect of how you are to be remembered.

A Fiduciary’s Advantage 

There are more potential threats to your wealth than we have space to discuss in one article, including inflation, lawsuits, and divorce proceedings. Nevertheless, the situation is far from hopeless. Understanding what types of threats exist and how they may affect your savings and assets is a solid first step.

Your next step should be sitting down with a financial professional to plan your protection strategies comprehensively; to cover multiple fronts at once. However, in a day when anyone can call themselves a “financial planner,this is not a position to fill casually. If you are affluent, you, in particular, need a trustworthy registered investment advisor to work closely with in pursuit of your financial goals. 

McGervey Wealth Management is a fiduciary firm. This means that our team is made up—not just of certified and experienced financial professionals, but—of advisors who are held to a higher standard of conduct. We are sworn to put our clients’ best financial interests ahead of our own at all times.

This principle is foundational to our comprehensive financial planning (and not all financial advisory firms can say this). We also specialize in full-cycle investing strategies, retirement planning, and other ways of streamlining your financial life. 

Contact us today to experience premier high-net-worth financial planning in Akron or Canton, Ohio. 

 

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More About the Author: Michael McGervey

Michael serves as a resource to executives and business owners, assisting them in making proactive and informed personal financial decisions. He is also a member of McGervey Wealth Management’s Investment Committee and is responsible for investment research as well as the execution of the firm’s portfolio strategies.