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3 Key Financial Planning Tips for Ultra-Wealthy Individuals

3 Key Financial Planning Tips for Ultra-Wealthy Individuals

February 08, 2023

Financial planning isn’t just for the middle class. In fact, it’s a necessity even for the ultra-wealthy. While it might be tempting to think your wealth will simply last forever, this isn’t a given. Your assets – no matter how substantial they are – need to be well-managed so they continue to grow and can potentially be passed down one day to your loved ones.

Whether you're just starting to build your wealth or have been in this position for years, having an effective strategy means monitoring investment opportunities and controlling costs while mitigating risk and looking to reduce your tax burden. Naturally, there is significantly more complexity that comes along with your situation than the regular earner. So, with that said, let’s discuss three key financial planning tips that can help you protect your wealth.

  1. Consolidate Your Assets Under One Financial Advisor You Trust

Hiring a trusted financial advisor when you’re an ultra-high-net-worth individual can provide peace of mind. Sometimes folks with significant wealth mistakenly assume that it’s safer to open accounts at various financial institutions in an attempt to “diversify.” In reality, this just causes confusion. Real diversification involves the investments in your portfolio, not the number of advisors, banks, and brokerages you use.

Using a single, trusted financial advisor provides the following advantages:

  • Potentially lower cost – fewer accounts to pay for and maintain
  • Streamlined administration – fewer account statements and tax forms
  • Increased organization – everything is all in one place
  • Efficient investment planning – easier to monitor investments and rebalance allocations
  • Simplified communication – a single contact with intimate knowledge of your entire portfolio
  1. Split Your Family Income to Save on Taxes

Ultra-high-net-worth individuals are liable to pay more taxes than lower-income folks because of how the U.S. tax system is structured. To reduce this burden on the family wealth, consider dividing your income among the lower-income earners in your family. For example, one way to do this is to gift money to lower-income family members at the end of the year. A gift up to the maximum exclusion amount won’t trigger taxable income on the receiver’s end, and these gifts can also be used in other ways (like setting up trusts, creating education funds, and making investments). It’s important to speak to your financial and tax advisors to ensure all money transfers are compliant and beneficial from a tax standpoint.

  1. Use Your Surplus Assets Wisely to Reduce Your Tax Burden

There are several ways people, including the ultra-wealthy, can deploy their extra assets to capture tax savings. A financial advisor can help you determine which strategies are best for your situation.

Here are some suggestions:

  • Set up philanthropic trusts or funds
  • Donate publicly traded securities that have increased in value to charities
  • Gift surplus assets to lower-income family members
  • Invest in a life insurance policy

While nearly everyone can benefit from financial planning, as an ultra-high-net-worth individual, you arguably need this service more than others due to the complexity and magnitude of your financial picture. But be sure that the financial advice you’re receiving has been tailored specifically to your needs – which clearly differ from other lower-income earners. Working with a reputable financial advisor you trust who specializes in this area will no doubt offer much-needed clarity and confidence in your financial future.