Protecting Wealth As It Grows

According to Spectrum Group, the nearly 7 million millionaires in the U.S. last year are almost entirely made up of retired individuals and those over 65 years old.  That means that much of the wealth in this country is sitting with those that are most likely out of the workforce.  Protecting that wealth has become more and more of an interest for these groups rather than growing it.

Paul Katzeff of IBD newspaper lays out some basic areas that these wealthy should focus on with their advisors to protect these assets:

  • Charitable Giving– Choose long-term stocks preferably that have had big run-ups recently to give away.  For stocks held more than one year, you can claim the full fair market value as a deduction (within legal limits)
  • Insurance– For a low cost, umbrella insurance policies can protect of potentially draining lawsuits.
  • Keep Debt Low– Downsizing and losing that mortgage is wise if you have market risk in your portfolio.  With the kids gone, think about passing on the large home.  Consumer debt should be paid off to avoid high interest costs.
  • Estate Tax Portability Rule– If one spouse dies, any unused portion of his or her lifetime exclusion shifts to the surviving spouse.  Start using the annual gift tax exclusion of $14,000 if you haven’t starting doing so.
  • Location of Assets– Talk to your advisor about which accounts to hold your assets, depending on their tax consequences.  Taxable bonds and other high income assets should be held in an IRA or 401(k) account.  Also keep assets that are high-turnover, thus creating capital gains, in tax-deferred accounts.  Municipal bonds belong in taxable accounts.

Your financial planner can work with you to create a plan to not only grow your assets over time, but protect them for years to come.  These are only a few strategies to protect your wealth.  Check in with your planner to see how he or she is protecting your wealth.