Wealth-Building & Multigenerational Asset Retention
While the endeavors are in ways dissimilar, successfully planning and surviving a big mountain expedition, and building and multi-generationally retaining a financial estate have much in common. The mountaineer must be conditioned (with strength, endurance, balance, and cold tolerance), equipped (with appropriate clothing and gear, and know how and when to use every item), and familiar with the chosen route (to remain within the skill set, maintain a margin for error, and stay on course). The mountaineer is afforded little tolerance for error, but so is the multigenerational wealth builder! Consider the skills and practices applied in their success:
Maintaining a net positive cash flow by working hard, increasing specialization in the chosen field, spending less than earnings, and investing the difference productively is foundational.
Effective Asset Management, among other things, requires:
Diversification into numerous non-correlated investments. Today 33% of SPY, a popular S&P 500 ETF, is invested in 10 stocks! That’s not diversification, as millions of American investors heavily exposed to this ETF may be about to discover.
An understanding we dwell in an inflationary culture, which forces more risk-taking than is natural, a concentration on assets with historical returns exceeding inflation coupled with avoidance of those which haven’t, and judicious risk mitigation strategies to sidestep the occasional meltdown unavoidable to fiscally reckless and heavily indebted societies.
Minimization of investment expenses, which directly dilute returns and compound the reduction indefinitely into the future.
Advanced Tax Planning, contrary to what most CPA’s suggest, involves:
Replacing the idea taxes should be minimized each year, with the more thoughtful idea lifetime taxes should be minimized.
Applying the means (Tax Loss Harvesting, Strategic Roth Conversions, QCD’s, CRT’s, etc.) to maximize taxes paid in low bracket years, minimize taxes paid in high bracket years, and prevent (not merely delay) every tax dollar possible.
Advanced Estate Planning goes beyond protecting the primary residence, naming trustees and executors, and properly designating beneficiaries, and:
Utilizes the lifetime gift tax exemption and GST exclusion.
Exploits the “step-up in basis” benefit for eligible assets.
Accounts for the possibility the Tax Cuts and Jobs Act of 2017 sunsets on December 31, 2025.
Logistical Retirement Income Planning arranges for a passive, sustainable retirement income stream that a) evaluates each possible source, b) meets expenses, c) satisfies Required Minimum Distributions, d) is prudent from an investment perspective, e) is compatible with the long-term tax strategy, and f) doesn’t interfere with the estate plan. What an interesting puzzle!
Asset Protection Strategies include the use of trusts, corporations, LLC’s, and liability insurance to isolate and minimize risk exposure with each wealth-building endeavor.
The complexity of both the large mountain expedition and the creation and retention of a financial estate requires a team effort. Both involve risks that must be identified and mitigated, and threaten deadly consequences for incompetence or neglect. Apply a thoughtful, diligent, holistic, and team approach to maximize your probability of success.
God bless your wealth-building and estate retention efforts! Shaun
"A good man leaves an inheritance to his children’s children" ~Proverbs 13:22
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