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7 Wealth Preservation Strategies to Follow

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A married couple looks over their finances together.

In an unpredictable economic landscape, ensuring the preservation of wealth becomes a paramount concern for every individual and family. Wealth preservation involves a strategic approach to safeguarding and growing one’s assets over time, protecting them from the erosive forces of market volatility and unforeseen events. A financial advisor can help you build a comprehensive strategy for preserving your wealth.

What Is Wealth Preservation?

Wealth preservation refers to the set of tactics and techniques aimed at protecting and maintaining the value of your assets, such as cash, investments, real estate and businesses, while minimizing risks. The primary goal is to sustain the purchasing power of your wealth over the long term and ensure it is available for future generations.

Wealth preservation is not an isolated event but an ongoing process that demands diligence, foresight and adaptability. By adopting the following strategies, you can protect your hard-earned wealth and secure a prosperous financial future for yourself and your loved ones. Remember, a well-prepared and diversified approach is key to weathering the unpredictable storms and capitalizing on the opportunities that lie ahead.

Strategy 1: Comprehensive Financial Planning

A comprehensive financial plan is an indispensable tool for achieving long-term financial stability and success. By mapping out your financial goals and strategizing to overcome potential challenges, you can build a solid foundation for a secure future. Here are key steps to create an effective financial plan:

  • Assess your current financial situation: Begin by evaluating your current financial standing. Calculate your net worth, track your income, expenses, debts and investments.
  • Develop a budget: A budget acts as a financial road map, helping you manage your money effectively. Differentiate between essential and discretionary expenses and allocate funds accordingly. Remember to leave room for savings and investments.
  • Build an emergency fund: Life is unpredictable, and an emergency fund serves as a safety net during tough times. Aim to set aside at least three to six months’ worth of living expenses in a separate, easily accessible account.
  • Invest for the future: Investing allows your money to grow over time. Diversify your investments across various assets such as stocks, bonds, real estate and mutual funds, based on your risk tolerance and time horizon.
  • Review and adjust periodically: A financial plan isn’t static. Review and adjust it regularly, especially when life events occur, such as marriage, the birth of a child or changing careers. Stay informed about changes in tax laws and investment opportunities.
  • Seek professional advice: Consider consulting a certified financial planner (CFP) to fine-tune your plan. A qualified expert can provide personalized advice based on your unique circumstances and help you stay on track to reach your goals.

Strategy 2: Asset Diversification

Diversifying your assets is a crucial financial strategy that can help safeguard your investments and foster long-term growth. By spreading your investments across various asset classes – including stocks, bonds, cash, real estate and other investments – you can reduce risks, enhance potential returns and achieve greater financial stability. 

According to research from Vanguard, a balanced portfolio comprising 60% stock and 40% bonds would have netted an annual return of 8.77% between 1926 and 2019. But diversification is about more than simply investing in a mix of stocks and bonds. The individual asset classes within a portfolio can be diversified. For example, your portfolio may contain a mix of defensive stocks to help you weather market downturns and growth stocks to maximize capital appreciation. 

Remember to regularly assess your portfolio and adjust your asset allocation as needed to stay on track toward achieving your financial objectives. 

Strategy 3: Proper Estate Planning

A couple signs estate planning documents.

Estate planning is a crucial but often overlooked aspect of financial management. Crafting a comprehensive estate plan ensures that your assets are distributed according to your wishes, reduces tax burdens and protects your loved ones from unnecessary legal hassles.

Proper estate planning is a proactive and thoughtful process that ensures your hard-earned assets are passed on to your loved ones smoothly and responsibly. By crafting a well-structured estate plan, you can have peace of mind knowing that your legacy is protected and your family’s future is secure. While a last will and testament is the foundation of most estate plans, you may also consider setting up a trust to safeguard and distribute your assets according to your wishes. 

Strategy 4: Invest in Insurance

In a world full of uncertainties, investing in insurance may be a prudent decision that can provide invaluable protection and peace of mind. From safeguarding your health to protecting your assets, insurance can play a pivotal role in securing your future. 

As you survey your finances and seek out ways to preserve your wealth, you may consider some of the following types of insurance: 

Life insurance. Life insurance is a contract through which a policyholder makes regular premium payments to an insurance company in exchange for an eventual lump sum payment – also known as a death benefit – that’s paid to their loved ones when they die.

Long-term care insurance. Long-term care refers to the various services and types of support a person needs as they age, including homemaker services and nursing home stays. While long-term care costs can quickly add up, they’re typically not covered by health insurance. Long-term care insurance, however, can help you pay for these vital services without having to spend down the wealth that you’ve accumulated. 

Medigap and Medicare Advantage. These supplemental healthcare plans are for people 65 and older. Medigap insurance helps supplement coinsurance, deductibles and copayments, while Medicare Advantage plans are offered by private firms approved by Medicare. 

By making informed decisions and choosing the right coverage, you can secure your future and that of your loved ones with confidence. Remember, insurance is not just an expense – it’s an investment that can help you preserve your wealth for the future. 

Strategy 5: Business Succession Planning

Business succession planning can be a crucial part of wealth preservation, especially for people whose net worth is primarily tied up in the businesses they own. It involves carefully designing and implementing a strategy to transition leadership and ownership from one generation to the next or from one set of hands to another.

By recognizing the significance of early planning, identifying and nurturing talent, maintaining transparency, seeking external expertise when necessary and addressing financial and legal aspects, business owners can secure the future success of their organization and ensure their wealth is preserved for future generations.

Strategy 6: Gifting Assets

Gifting assets to family, friends and the causes you care about can be an effective way to lower your tax liability and preserve your wealth over the long term. 

In 2023, the IRS allows you to gift up to $17,000 per person tax-free. What’s more, you can give that amount to as many people as you like in a given year. Gifts that exceed the annual limit count against your lifetime gift tax exemption limit, which is $12.92 million as of 2023. Once you exceed that lifetime limit, you’ll face federal gift tax rates that range between 18% and 40%. But keep in mind that these taxes won’t come into play as long as you haven’t hit the lifetime gift tax limit. 

So how can giving money away help you preserve wealth? Estates of more than $12.92 million are subject to the federal estate tax (18-40%). Gifting assets while you’re still alive lowers the size of your eventual estate, which can eliminate or lessen the eventual tax bite your estate faces after you die.  

But gifting assets can also lower your tax burden while you’re still alive. If you regularly donate to charity, you may consider making a qualified charitable distribution (QCD) from your retirement accounts. QCDs can satisfy your required minimum distributions (RMDs) and eliminate the tax burden associated with these mandated withdrawals. And since the money is going to charity, it doesn’t count as taxable income. 

Strategy 7: Choose the Right Financial Advisor

A couple meets with their financial advisor to discuss wealth preservation strategies.

Lastly, working with the right financial advisor can be a crucial part of your overall wealth preservation strategy. But with so many options available, it can be overwhelming to determine who will best meet your needs. 

By assessing your needs and considering credentials, fees and checking references, you can find an advisor who suits your requirements. Remember, open communication and a shared vision for your financial future are key to a successful advisor-client relationship. 

While interviewing potential advisors, you’ll want to ask about the services they offer. Since you’re primarily looking for an advisor to help you preserve and protect your wealth, you’ll need an advisor who offers tax planning, insurance analysis, trust and estate planning, portfolio management and financial planning. 

Bottom Line

Wealth preservation is a comprehensive and multi-faceted process that involves your investments, estate plan, insurance needs, business succession plans and overall financial plan. Remember, a financial advisor can help you protect your assets and preserve your wealth for years to come. 

Wealth Preservation Tips

  • A financial advisor can help you tie together all of the wealth preservation strategies above into a cohesive plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Life insurance can help ensure that your loved ones are taken care of after your death. But how much coverage does your family need? SmartAsset’s life insurance calculator can help you answer that question. 

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