As Americans approach retirement, preserving the wealth they’ve worked hard to build becomes a top priority. For affluent individuals, protecting assets is not just about maintaining their lifestyle; it’s about helping protect generational wealth, mitigate risks, and help ensure peace of mind.
Asset protection involves structuring financial and physical assets to help reduce vulnerability to risks such as lawsuits, market downturns, or unforeseen expenses. In this blog, we’ll explore why asset protection is essential for those nearing retirement and outline common strategies individuals use to help protect their wealth.
Disclaimer: This content is provided for informational and educational purposes only and does not constitute financial, legal, or tax advice. NJM Wealth Preservation Strategies does not provide investment advisory services or legal/tax advice.
Asset protection refers to strategies designed to legally shield assets from potential risks, such as lawsuits or excessive tax burdens, while fully complying with all state and federal regulations. This planning helps ensure that assets are organized to preserve financial security without engaging in unethical or fraudulent practices.
For retirees, asset protection may include preparing for long-term care expenses, managing investment risks, and minimizing tax exposure.
Who Should Consider Asset Protection?
Affluent individuals nearing or in retirement face unique financial challenges, including:
In today’s litigious environment, individuals with substantial wealth may face higher exposure to legal claims. While legal disputes can arise from various scenarios—such as personal liability or business matters—proactive measures can help mitigate the financial impact.
Common asset protection tools, such as liability insurance and legal trusts, can help reduce exposure to lawsuits and protect personal savings.
Market downturns can significantly impact retirees’ portfolios, particularly if they rely on investment income. Diversification and strategic asset allocation may help reduce risks while aligning financial plans with personal goals.
By working with a qualified professional, retirees can explore options to help reduce their exposure to volatility while maintaining growth potential.
One of the most significant risks for retirees is the rising cost of healthcare. According to the U.S. Department of Health and Human Services, 70% of adults over age 65 will need some form of long-term care during their lifetime.
Estimated Costs in 2023:
Financial tools such as long-term care insurance and trusts are designed to address healthcare costs and can help retirees manage these significant expenses.
Without proper management, taxes can significantly impact your wealth. High-income households and retirees face distinct challenges when dealing with capital gains, estate taxes, and retirement account withdrawals.
Considerations for Reducing Tax Burdens:
While proactive planning can help address these issues, consulting a financial professional can help provide additional insights and strategies.
Leaving a financial legacy is a top priority for many retirees. Asset protection strategies, like irrevocable trusts and family limited partnerships, can help preserve wealth and ensure it’s distributed according to the retiree’s wishes. These tools can also help minimize estate taxes and shield assets from potential claims by third parties.
Trusts are widely used to help shield assets and control their distribution.
Adequate insurance coverage serves as the first line of defense against unexpected risks. Options include umbrella liability insurance, long-term care insurance, and life insurance with cash value components.
For retirees who own businesses, forming entities like limited liability companies (LLCs) can separate personal and business assets, providing additional protection.
Dividing assets into different ownership structures or accounts may help reduce risk exposure and help ensure diversification.
Contributing to retirement accounts like IRAs or 401(k)s not only provides tax benefits but may also offer potential protection under state and federal laws.
Asset protection is an essential component of a comprehensive retirement plan. Proactively addressing potential risks and structuring assets with care for affluent retirees can help safeguard wealth for their lifetime and future generations.
With a focus on personalized planning and professional resources, NJM Wealth Preservation Strategies helps clients explore options for preserving and protecting their wealth.
Contact NJM today to learn how asset protection strategies can support your financial goals.
This content is provided for informational and educational purposes only and does not constitute financial, legal, or tax advice. NJM Wealth Preservation Strategies does not provide investment advisory services or legal/tax advice.