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Anna Johansson
Anna Johansson
Articles (36) 

8 Strategies to Protect Your Wealth

If you aren’t careful, that wealth could quickly become vulnerable to loss or seizure

April 08, 2020

If you’re like most people, many of your long-term goals revolve around building and maintaining wealth. Over the course of a lifetime, you can accumulate enough savings, assets and investments to secure your retirement, and hopefully maintain a lucrative lifestyle.

But merely attaining wealth isn’t enough. If you aren’t careful, that wealth could quickly become vulnerable to loss or seizure. Fortunately, there are plenty of strategies you can use to protect your wealth from those risks.

Wealth protection strategies

Let’s examine some of the best wealth protection strategies you can employ:

  1. Diversification. One of the most important pieces of advice is also one of the most commonly understood: diversify your holdings. Portfolio diversification is a strategy that encourages you to distribute your wealth into a wide variety of different asset types. That way, if one asset type fails to perform, or if you suffer heavy losses in one specific area, the rest of your wealth will be unaffected. Investors commonly choose investments in a range of classes, including stocks, bonds, real estate, commodities and even precious metals.
  2. Asset insurance. If much of your wealth is tied up in physical assets, it should be a no-brainer to get insurance for those assets. Most people are required to have home insurance by a mortgage provider, and additional types of insurance like auto insurance can help you protect your most valuable possessions. Make sure these policies are up-to-date, so they can protect you in the event of a natural disaster, theft or other incident.
  3. Liability insurance. In addition to your asset-centric insurance, you may want a liability insurance policy. Liability insurance will cover your legal expenses if you ever find yourself involved in a legal issue. This is especially important for business owners.
  4. Offshore asset protection trusts. Some people may benefit from the use of an offshore asset protection trust. Essentially, you'd use this strategy to create a trust or business entity in a foreign jurisdiction, like the Cook Islands. These trusts will not have a business presence in the United States, making them useful for protecting assets if you’re concerned about the reach of U.S. court systems.
  5. Business entities. If you’re concerned about legal issues cropping up in your business, it’s important to create a business entity. It’s possible to run a business without much paperwork and without introducing new complexities by choosing to operate as a sole proprietorship or a partnership. However, these types of entities can leave you personally responsible for a wide range of legal and financial issues. It’s usually better to create a limited liability company (LLC) or a corporation, which are treated as separate legal entities.
  6. Retirement accounts. In many cases, your retirement accounts will be protected from being seized or compromised. Specially designated accounts like 401(k)s and IRAs will therefore afford you more protection than a basic bank account or brokerage account. Try to funnel more of your assets to these sources.
  7. Homestead exemptions. In many states, you’ll have access to a “homestead exemption,” which allows some or all of your home equity to be protected from certain types of action. For example, in Texas and Florida, you’ll have unlimited access to a homestead exemption. The more valuable your home is, and the more equity you have in your home, the more your money could be protected.
  8. Transfers. In many cases, you can also protect your wealth by transferring it; once the property is no longer yours, it’s going to be protected from a multitude of different threats. Consider transferring your property to a spouse, a child, a loved one, or even a trusted friend—just make sure you understand the legal and tax implications before you do it.

Improving Your Approach

If you’re financially savvy, you may already have a robust wealth protection strategy in place to maximize your long-term financial health. However, most people will need some advice along the way. If you’re concerned about your wealth, or if you’re just looking for a second opinion about your current strategies, it’s in your best interest to talk to a lawyer as soon as possible.

Disclosure: I do not own any of the stocks mentioned in this article.

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About the author:

Anna Johansson
Anna is a freelance writer, researcher, and business consultant. A columnist for Entrepreneur.com, HuffingtonPost.com and more, Anna specializes in entrepreneurship, technology, and social media trends. Follow her on Twitter and LinkedIn.

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