By: Claire Edicson
Building wealth is not solely about luck. It takes years of discipline and smart choices, along with a dash of luck, to reach the high-net-worth individual (HNWI) category.
In 2024, the high-net-worth individual (HNWI) population and wealth grew significantly. They increased by 2.6% and 4.2%, respectively.
The wealth management industry is on the cusp of a major shift, however. The biggest factor driving this change is the great wealth transfer, a massive passing of wealth from older generations to younger ones, such as Gen X, millennials, and Gen Z.
By 2048, a staggering $83.5 trillion is projected to be transferred to these next-gen HNWIs.
Until then, how do you make sure what you’ve built stays strong for the next generation? There are plenty of ways to preserve wealth and protect assets, so you can pass them down successfully. Here are a few of them.
#1 Use Trusts to Your Advantage
Trusts are one of the most reliable tools for wealth preservation. They give you control over how and when your assets are distributed. That way, you don’t have to leave everything to chance or a public court process.
There are two types of trust: revocable and irrevocable. A revocable trust gives you total control. You can change the rules, beneficiaries, or cancel it completely at any point during your life.
Irrevocable trusts are unchangeable once created. It removes assets from your taxable estate, offering strong protection. To gain protection, however, you need to give up some ownership.
But if you want to transfer wealth across several generations, a generation-skipping trust (GST) is a great tool. This type of trust is structured to transfer assets to grandchildren or even great-grandchildren.
This can help your family avoid a second layer of estate taxes. This second round of taxes would typically be incurred if the assets were transferred directly to your children and then to your grandchildren.
For philanthropically minded individuals, charitable trusts can help achieve both financial and social objectives. You get a tax deduction now, receive income for life, and whatever is left goes to charity.
#2 Have a Business Exit Strategy and Succession Plan in Place
For many wealthy individuals, a big part of their net worth is the business they built from the ground up. Yet many successful entrepreneurs delay planning what happens when they step away.
A clear exit strategy and succession plan serve as a roadmap for your business. They help you transition leadership and ownership smoothly, preserving the company’s value and securing your family’s financial future.
Still, research shows that 48% of businesses don’t have an exit plan in place. And more than a third of businesses, or 37%, don’t have a succession plan at all. Don’t delay your exit strategy and succession planning. In fact, the earlier you start, the more you can benefit from it.
According to Richard P. Slaughter Associates, with a plan in place, you’ll have more clarity in your business and personal goals and increased revenue and operational efficiency before valuation. Your team, from potential successors to employees and future buyers, will also be better prepared for the transition.
To get started, define your goals first. Do you want to sell the business or transition leadership to a partner? Identify potential successors then. Document all key processes to ensure the business can run without you.
#3 Diversify Beyond Traditional Investments
Stocks, bonds, and mutual funds are important, but they shouldn’t be the only places where your money works. True wealth preservation calls for diversification beyond traditional markets.
Many HNWIs are exploring alternative investments. Their ROI is higher, they can provide new income streams, and they can also protect you from market ups and downs.
Not surprisingly, younger, ‘next-gen’ people (under 60) are showing a strong and growing interest in alternative investments. In fact, relationship managers report that 88% of HNW clients show more interest in alternative investments compared to older adults.
Private equity is a popular alternative investment choice for HNWIs. It involves investing directly in private companies, taking stakes that are not publicly traded on a stock exchange.
Real assets, like real estate and commodities, are a classic choice for alternative investments because they can help protect your portfolio against inflation. They, for example, can provide a steady income stream from rent and appreciate over time.
Other alternatives include art, collectibles, and cryptocurrencies. These appreciate in value. But many alternative assets are not liquid, meaning you cannot sell them quickly.
Your Next Steps
Preserving wealth is about creating a lasting legacy, not just securing numbers on a balance sheet.
You’ve worked hard to build your legacy. Now, it’s time to make sure it lasts for generations. Follow these tips and your legacy can thrive for generations.
Don’t go through the process by yourself. Partner with a trusted team of advisors, such as financial planners, legal experts, or tax professionals. They will help you make the right moves with confidence.
When handled with foresight, wealth preservation minimizes conflict, reduces unnecessary taxes, and keeps your family secure no matter what comes.
About the Author: Claire is a technology journalist with extensive experience covering emerging tech trends, AI developments, and the evolving digital landscape. Her experience helps readers understand complex technological advancements, and how they can be implemented in their everyday lives.
