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Why Do You Need a Wealth Protection Plan?
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Why Do You Need a Wealth Protection Plan?
Clients usually look for the follwing when building a wealth protection plan,
#1: Legal tax reduction strategies
Clients want to know how to legally reduce their taxes. Sometimes this is done with domestic solutions. Usually, The best opportunities are found internationally. This is not something you want to do on your own. The rules — especially for US clients — can be complex and contradictory. You need a guide.
#2: Creating a “Plan B” and diversification
Many clients are looking for a sense of freedom and peace of mind that comes through diversification. Helping them access offshore banking, investments, citizenship and residency is a powerful insurance policy against threats here in the US.
#3: Holistic domestic and offshore planning
Whether you need a complete plan from start to finish or you already have a few pieces in place but need our experience, expertise, and network we can assist you.
Whatever your needs are, we are here to make sure all the pieces fit perfectly. That includes Financial (taxes, banking), Legal (structures, legal entities), and residency/citizenship planning. Fully compliant with tax laws and regulations at home.
At the end of the day, you’re going to have a complete bespoke strategy tailored to your needs.
#4: Access to new opportunities
A good wealth protection plan is not just reactive. It’s proactive too. And indeed, clients know that there are opportunities overseas that simply don’t exist here in the US. For banking, second citizenship, tax opportunities, and private investments.
The most successful firms in this field build up a network of professionals who can give access to the best of these opportunities.
In our case, clients get to tap into that network and the doors the “Nestmann” name can open for them.
Who Needs a Wealth Protection Plan?
Wealth protection isn’t one-size-fits-all. Different groups have unique needs when it comes to safeguarding their assets. But that’s not to say certain groups don’t have a stronger need than others. Here are the groups that need it the most:
High Net Worth Families and Individuals
This group has at least $1 million in liquid assets not including the home they live in. They tend to have a wide range of assets – both traditional and alternative… and have access to opportunities not available to the general public.
Because of their wealth, frivolous lawsuits can be a problem. Ever changing government regulation often makes their lives more difficult. Estate planning is usually more complex. Specialized asset protection may be necessary. And there are often tax reduction opportunities.
Business Owners
We work with many business owners who are asset-rich but cash-poor. They often have a big chunk of their wealth tied up in their business and/or the building it’s in and/or the land it sits on.
With such clients, reducing risk is a big necessity. But there’s a lot of opportunity too – business owners have the chance to reduce their tax burden in a way other groups don’t have.
Professional Investors
Over the years, we’ve worked with quite a few professional investors.
They often fit into one or more of the other groups and have some of the same needs as other groups. But because they (usually) have their fingers in so many pies, risk management tends to be a focus for their planning.
Retirees
Retirees are often focused on wealth preservation. They usually have a nest-egg but not a lot of income, so keeping what they have is very important.
When we work with such clients, we put a heavy focus on eliminating risk from their lives. Anti-inflation strategies, making full use of government protections, and specialized insurance play their part.
Depending on how far the client is into retirement, pensions and estate planning often need to be considered.
Expatriates
Americans living overseas have some unique problems that those living stateside don’t have to deal with.
As it relates to wealth protection, the biggest is the never-ending reporting to Uncle Sam on almost any asset held overseas – from bank accounts to stocks to foreign property not held in your own name.
When we work with such clients, we often have to focus a lot on compliance and reporting issues. But there are also some opportunities – most notably substantial tax breaks Americans living overseas can access that others can’t.
Building Blocks of a Wealth Protection Plan
Putting together a strong wealth protection plan is like building a house. Each part has a specific role in keeping the structure solid and safe. In our comprehensive guide on wealth protection planning, we described in detail the nine building blocks of our plans. They are:
1. State and Federal Government Protections
These are key to protecting your wealth. They offer free help like homestead provisions, Social Security, and retirement fund protections. These can vary a lot from state to state and have different rules.
2. Liability Insurance
This is really important for keeping your wealth safe, especially from lawsuits. Getting umbrella insurance, adding extra coverage where needed, and not going for the cheapest option can make a big difference.
3. Bank Safety
After some big bank failures in 2023, it’s clear that keeping an eye on your bank’s health, not putting all your money in one account, and using Treasury Direct for short-term funds can keep your money safe.
4. Asset Protection
Protecting your assets involves using trusts and LLCs to keep your wealth safe. It’s about making smart choices without making things too complicated. Matching your protection plan to your actual needs is key.
5. Retirement Planning
Planning for retirement is a big part of keeping your wealth safe. Having a durable power of attorney and keeping your will or trust up to date are smart moves to make sure you’re prepared for the future.
6. Wealth Management
For those with a net worth over $1,000,000, managing your wealth to avoid loss, keep up with inflation, and grow your savings is crucial. Diversifying investments and considering life insurance policies can help with this.
7. Tax Reduction Opportunities
Reducing taxes is a big chance to protect your wealth but it has to be done carefully to avoid issues with the IRS. Setting up a solo 401(k) and looking into the Foreign Earned Income Exclusion can help a lot.
8. Anti-inflation Strategies
Fighting inflation means making sure your wealth doesn’t lose value. Using a mix of stocks, bonds, cash, and gold, and buying non-perishable goods in bulk can help protect your money from inflation.
9. Personal Freedom through Second Residencies and Second Passports
Having a second residency can give you more freedom and security. It can mean more rights, visa-free travel, and access to other opportunities not available in the US. It’s about having options and flexibility.
Domestic vs International Wealth Protection Plans
When thinking about safeguarding your wealth, you have two main paths: keeping it close to home with domestic plans or spreading it out globally with international plans. We build both for clients depending on their needs.
Each has pros and cons.
Pros of Domestic Plans:
- It’s easy to manage assets within the US—everything’s in one system and you know the rules well.
- You get to work with US legal structures, which you’re more likely to be familiar with.
- You’re dealing with American institutions, which can sometimes mean less cultural and legal confusion.
Cons of Domestic Plans:
- You’re exposed to the ups and downs of the American economic system and markets. All your eggs are in one basket.
- You’re exposed to new laws and regulations from Washington.
- It’s easier for your domestic assets to be targeted by private creditors and frivolous lawsuits.
- If you are ever targeted, it’s much easier to get your assets frozen. That makes it harder, if not impossible, to properly defend yourself.
Pros of International Plans:
- Spreading investments across different countries can reduce your exposure to a failing US economy, unsteady markets, or dollar collapse.
- There are some strong potential tax benefits that can come with going international. (Our average “US to global” client is able to reduce their tax burden by 65.4%)
- You can effectively hide all international assets from domestic threats.
- You can get access to better opportunities than available here in the US.
- You can tap into better asset protection structures.
- You gain back freedom by having the option to leave if you need it.
Cons of International Plans:
- Juggling the laws and taxes of multiple countries adds a layer of complexity to your planning.
- Some clients have a hard time adjusting to the business, investment, and legal culture of other countries.
When to choose which? It really depends on your goals, your risk exposure, your comfort level, and how much cash you have to work with.
With our clients, most choose to find the right balance of domestic and international options.
