Many high net worth families are above their “freedom line.” They can choose to make more money, but it will not change their lives. These families are focused on the same issue – making the most from their money, in terms of personal enjoyment, philanthropy and leaving a legacy.
However, if certain financial blind spots or land mines are not addressed, more than $3,000,000 could evaporate (based on planning for clients who had net worth’s of $10,000,000+) and wind up in the hands of the No. 1 nemesis – Uncle Sam.
Why would this occur? Not knowing any better. Not getting advice from their professional advisors. I will get to it someday mentality.
How can these be avoided?
I have assembled some of the top tax planning experts in the country, and they have developed some proprietary tax reduction and avoidance strategies. What separates our team of tax experts from other advisory teams is that our people study the tax codes for unique planning opportunities. Understanding the difference between ownership and control of assets is critical for successful tax planning: You own it, you pay tax. You control the asset, you don’t pay tax!
I have provided some answers for you to match up to the appropriate financial blind spots listed further below: Charitable Remainder Trust, Qualified Opportunity Zones, Natural Gas (tax deduction), The Ideal Plan, Conservation Easement, Captive Insurance Companies, Defined Benefit Plans, Arbitrage with Corporate entities, Deferred sales Trust, Premium Finance Life Insurance, Life Settlements, Private Investments, Disability Insurance, Funded Buy Sell Agreements, LLC, Family Limited Partnership, Titling of assets, Beneficiary designations, Private or alternative investments will add 5-10% more to rate of return and not correlated to stock market, Annuities, Cost segregation.
The ability to combine sequence-timing with the above answers can also create more planning opportunities for families. Second opinions on your financial planning are critical to letting the families see what their current advisory team might be missing!
Financial Blind Spots
Problem #1: Assets unjustly taken. Reason: Frivolous lawsuits. Solution: Asset protection planning – it’s not what you own, but what you control.
Problem #2: Paying too much in taxes. Reason: Not receiving proactive tax planning advice from current advisory team. Solution: Hire the right advisors who study/implement the green lights in the tax code.
Problem #3: Health care & long-term care. Reason: It’s not going to happen to me. Solution: Outsource the risk to an insurance company.
Problem #4: Inflation. Reason: Wrong allocation of investments. Solution: Use more private investments which aren’t correlated to the stock market.
Problem #5: Estate Planning. Reason: Procrastination. Solution: Get off your butt and get your estate planning documents done. Learn strategies that provide tax-efficient distributions at death, but also while alive. With improper planning, the government will become one of your beneficiaries.
Problem 6: Sequence of return risk. Reason/Result: The key to any successful investment outcome is the ability to manage the volatility that is inherent in the stock market. Not understanding the significance of withdrawing monies from investments when the market is down in the early years of retirement can be costly. Solution: Have a reserve that one can turn to during down markets.
Problem 7: Fees and Expenses. Reason: Most investors are not aware of their options for advisory fees. Their current advisory team is charging a percentage for managing investments, a method creating conflicts of interest, as well as overcharging for the services they are rendering. Solution: Implement flat fees based on the complexity of one’s financial situation. This will eliminate the conflict of interest from the advisor and can save well over $1,000,000 in fees.
Problem 8: Satisfied with the status quo. Reason/Result: Is in love with their current advisory team even though they are not receiving proactive advice to accumulate more wealth … by the way, whose money is it? Yours or your advisors? Would you not want a second opinion? Solution: Incorporating the Family Net Worth concept will motivate the family to go the extra mile and understand how incorporating philanthropy will lead to more wealth accumulation as well as eliminate the government participation in your planning.