10 Strategies for Preserving Your Wealth

2008 brought to the world the worst financial disaster since the great depression of 1929. People lost their jobs, investments tanked, the value of real estate dropped, and financial anxiety was at its peak. The aftermath of the financial crisis of 2008 was equally alarming. There were approximately 8.8 million jobs lost in total with unemployment reaching 10% by October 2009. Moreover, employer-sponsored retirement accounts also dropped by 27% in 2008.

While the global economy came to a standstill, the crisis brought some critical lessons for investors to the forefront, such as the importance of creating an emergency reserve, saving for retirement from an early age, diversifying your portfolio by not limiting yourself to one asset group, and – most importantly – building wealth and making sure that your estate preserves its value. All of these lessons are just as important in the present day, given the 2020 Covid-19 pandemic and the subsequent lockdowns that were imposed. With markets, offices, travel, and trade coming to a halt, the world suffered great economic losses during the pandemic that significantly impacted the average investor’s portfolios.

While foreseeing a financial crisis is not in your control, what you can do is prepare yourself for uncertainty by taking charge of your wealth. Proper wealth management can help you preserve your wealth and manage your assets optimally so that you can handle economic turbulences and land back on your feet with minimal disruption. Wealth preservation also lets you manage your assets and estate, reduce taxes, and plan your present and future in the most effective manner.

1. Prepare a will

One of the foremost strategies that you can follow for the preservation of your wealth is to create a will. A will contains a detailed explanation of how you wish to distribute your assets, such as life insurance plans, retirement plans, real estate, cash reserves, investments, savings accounts, and more. A will can be used to preserve money for future generations. It ensures that your money is well looked after in your family and is given to the rightful heir.

Making a will is also crucial in the case of remarriage and divorce. In the case of a divorce, a will can determine what percentage of your estate goes to your ex-spouse, if at all, and what percentage of it is reserved for your current spouse. Likewise, the percentage of your estate that will go to your stepchildren, children, and/or adopted children can be clearly stated in your will, so there are no disagreements in your absence.

A will can also help you minimize estate tax, gift tax, etc. so your estate retains its true worth, and is not reduced by tax penalties and liabilities. If you wish to know how to maintain your wealth, drafting a will and keeping it up to date is the first step you should take towards wealth preservation.

2. Use your estate tax exclusion

A considerable amount of your wealth can be lost to taxes, which can thereby affect your estate’s worth. However, the Internal Revenue Services (IRS) offers an estate tax exclusion limit that can help reduce the amount you pay in tax for your estate. In 2021, this limit has been fixed at $11.7 million as compared to $11.58 million in the year 2020. As per the estate tax exclusion rule, you can pass off an estate below the value of $11.7 million to your heirs without having to pay any tax. Statistics show that only 1% of estates fall above the limit of $11.7 million. Hence, this exclusion can be helpful to most estate owners. However, if you own a larger estate and are over the tax exclusion limit, you will need to find a wealth strategy that is more suitable to preserve your wealth. It is advisable to consult a financial advisor to find out more about how the rich preserve their wealth so you may adopt a financial plan that is suited to your needs.

3. Title your assets to avoid probate

It is not only important to invest in the best investments to preserve your wealth, but also to title them correctly. When you buy an asset or invest in a savings plan, you must be mindful of naming a beneficiary. This person can be a spouse, child, sibling, parent, etc. In the unfortunate event of your death, the asset will be passed on to this nominee.

While most savings accounts and assets have the option to add a beneficiary, not many people make use of the option. Keep in mind that in the absence of a nominee or in a situation where the nominee on an account does not match the one on your will, your estate may be subjected to probate. Such a situation can lead to higher administration expenses, delay in the execution of your wishes, and subject your affairs to unwanted publicity.

4. Monitor your retirement plan assets

If you plan to gift your Individual Retirement Account (IRA) or any other qualified retirement or savings plan to your heirs at the time of death, the account could lose up to two-thirds of its value to federal estate and income taxes. In order to avoid this, you can take distributions from the said account and purchase a life insurance policy held in an Irrevocable Life Insurance Trust (ILIT). This way, your heirs receive the plan’s proceeds without having to incur any estate and income taxes. Additionally, your account preserves its original value, thereby ensuring money preservation, wealth management, and reduced tax liabilities.

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5. Gift assets that you do not need to family members

Another way to reduce your tax liability and preserve money is to use gifts as a way to pass on your assets to family members. The IRS charges a gift tax on highly valued assets, such as a house, large amounts of cash, etc. However, there is a limit for this within which you can give gifts without paying any tax. In 2021, the gift tax limit is set at $15,000 per annum for individuals and $30,000 per annum for a couple. Any unused asset can be given to a family member as a gift. This will not incur any taxes and, at the same time, will keep your assets within your family.

6. Keep enough assets liquid to satisfy your estate taxes

Generally, the IRS requires that any federal estate tax liability is satisfied within nine months of the date of your death and that the payment is made in cash. If you are passing on your estate to your heirs, the responsibility of paying these tax liabilities falls on the inheritor. Hence, it is important for you to also leave behind some liquid assets that can help your inheritors pay taxes on your estate. There are four options that you can choose from:

• Cash reserves
• Loans
• Liquidation of assets
• Life insurance proceeds

7. Refrain from naming your estate as the beneficiary for life insurance

The name of the nominee on your life insurance plan plays a crucial role in its taxability. For instance, if you name a person as the beneficiary, the insurance proceeds will typically not garner any taxes. However, if you choose your estate as your beneficiary, the proceeds from your insurance plan will be simply added to your estate’s gross value and taxed based on the total value of your estate.

8. Know what assets you have and where you have them

Wealth preservation goes beyond making a will. Sometimes, it can entail the simplest of habits, such as keeping copies of all important documents, like insurance papers, retirement contributions, and withdrawal notes, bank account papers, real estate purchase bills, power of attorneys, and more. Make sure to keep copies of all critical documents in a safe place that can be easily accessed when needed.

9. Choose executors and trustees wisely

Be careful while selecting an executor or trustee for your estate. Most people end up picking a family member or friend as the trustee or executor for their estates. While this may offer you some familiarity and relief at first, it can also lead to problems later. Family members can have their biases and prejudices come in the way of their judgment. This can ultimately result in family tiffs and sometimes even probate. Hence, to ensure complete transparency, pick a professional, like a lawyer, as an executor, or opt for a trust company to manage your trust.

10. Meet with a financial advisor

Lastly, it can help to discuss your future financial goals, estate planning objectives, family requirements, limitations, personal preferences, etc. with a financial advisor. A financial advisor can offer you professional services on estate planning that can help minimize tax and maximize wealth preservation. These professionals can suggest different strategies to retain the value of your estate as it is passed on to your future generations.

Why do I need a financial advisor to manage my wealth?

While the strategies mentioned above can help you preserve wealth, it can still help to get professional help on certain matters. A financial advisor can offer you the necessary support to manage your wealth optimally. These professionals have years of experience and knowledge to back their recommendations. They can suggest the most suitable ways to invest your money and keep it secure against the turmoil of the market. They can plan your estate in a manner that results in minimal tax outflows. A financial advisor can also help you with asset management, thereby managing your assets, such as stocks, bonds, real estate, etc. They can also recommend the right products that make for the best investments to preserve your wealth and that align with your financial objectives and risk appetite.

Conclusion

• The right preservation of wealth strategy can offer you many long-term benefits. Additionally, consider using the guidance of a financial advisor to provide you with the best strategies to manage your wealth and perverse it for the long run.
• Make sure to also pay attention to your financial advisor’s payment method while picking a professional to manage your wealth. Some financial advisors charge you using a fee-only model, while others charge you using a fee-based model. The former takes a flat fee based on the hour or based on the project they work for. The latter charges you a commission on investments you invest in. You may pick the advisor based on what is most suitable to your financial needs and preferences.
• Remember to follow the tips given above to maintain wealth and preserve your money for the long term.

To further understand strategies that you can implement to preserve your wealth, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.