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Why Ultra-High-Net-Worth Individuals Should Still Work With an Advisor

Jay Beebe, CFP®

Director of Financial Education

Last Updated
July 15, 2022
high net worth man shaking the hand of his advisor

5 Challenges Faced by UHNW Families

A common misconception among many non-high-net-worth individuals is that once you achieve a certain level of wealth, your financial problems disappear. While it’s certainly easier to live a luxurious lifestyle as a wealthy individual, more money often leads to increased complexity and higher stakes. In fact, it can be even more important for ultra-high-net-worth (UHNW) individuals (those with greater than $30 million in liquid assets) to have a trusted advisor in their corner. Here’s why.

Tax planning

Tax planning for UHNW individuals can be especially complex, in part because the tax treatment of the country’s wealthiest citizens is constantly changing. UHNW individuals often need the advice of an advisor and a CPA just to keep up with this changing landscape.

The challenges of planning for taxes impact virtually every aspect of a UHNW individual’s financial life. Fortunately, a qualified advisor and CPA can help implement a variety of strategies to offset this tax liability, including:

  • Taking advantage of tax-loss harvesting of investment portfolios
  • Maxing out HSA and retirement plan contributions to reduce taxable income
  • Coordinating Roth conversions to take advantage of low tax brackets
  • Establishing backdoor IRAs
  • Orchestrating intergenerational gifting strategies
  • Formulating a charitable giving plan
  • Providing proactive tax guidance and return preparation

Investment management

One of the ways many UHNW individuals are able to achieve higher levels of wealth is by investing in vehicles that have the ability to outperform the publicly traded market. Navigating this space is a challenge, with an estimated 3,500 portfolio managers to choose from in the U.S. alone. When working with a qualified advisor, he or she can provide much needed due diligence as well as scale to access top quartile performers, something extremely important to achieving success in this area.

Charitable giving

Many UHNW families are inspired to share their wealth to promote their personal values. For these families, it’s important to have a multigenerational planned giving strategy. A qualified wealth advisor can help maximize the impact of charitable donations while also lowering your family’s tax burden. Some of the common tools used to achieve this are:

Estate planning

While estate planning is an important step for any investor, it’s especially vital for UHNW individuals. When large sums of money are involved, there can be vast unintended consequences to not having a buttoned-up estate plan.

As of 2022, an estate valued at up to $12.06 million is exempt from estate tax. Assets above that amount, however, are taxed at 40%.1 In addition to this, some states levy their own estate or inheritance taxes.

Another important consideration for UHNW families is ensuring assets are passed down to heirs — and protected — according to their wishes. When a wealthy person dies, long-lost friends and family often come out of the woodwork with claims on the individual’s assets.  The rightful heirs can also become a target when individuals believe they are newly wealthy.

Fortunately, with the right estate planning strategies in place, many UHNW families are able to reduce their estate tax liability, efficiently pass along assets outside of probate and provide protection to future generations.

Illiquid assets

UHNW individuals typically have a significant percentage of their wealth tied up in illiquid assets, such as real estate, businesses, art and collectibles, cars and boats, etc. With illiquid assets come additional accounting and tax challenges (such as valuations and property taxes) that qualified wealth advisors can help UHNW clients navigate. In addition, a qualified advisor can help ensure these assets are properly insured against damage or theft.

If you’re an UHNW individual in search of a qualified team of advisors, look no further. Creative Planning’s teams understand the challenges faced by the ultra-wealthy and can implement custom strategies to help grow, protect and preserve your wealth. For more information, schedule a call with a member of our team.

Footnotes:

  1. https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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