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Spending Trend for Wealthy Heirs

Posted on: February 19th, 2015
wealthy investorsNew surveys of ultra-wealthy individuals show a pattern in inheritance investments. A growing number of inheritors plan to invest in private companies. Forbes recently reported, “While there is a growing discontent among a percentage of the ultra-wealthy investing through traditional funds, their interest in investing in private companies, infrastructure, real estate and other similar types of assets, has grown unabated.”

Even though public companies generally are easier to invest in and have publicly available financial reports, private company investments offer several advantages over public investments. Private companies are not required to publicly reveal quarterly performance, which means they generally focus on long-term growth. Also, the World Economic Forum shows that public companies that convert to private standing increase their productivity. 

How can an investor preserve their stake? Whether an heir intends to use an inheritance to fund a startup, real estate development, or other private venture – investors should follow a few asset protection strategies to ensure the deal is optimally structured:

Direct investment. Is the heir planning to make a direct investment as an individual, through a Limited Liability Company, or through another entity? An asset protection attorney can review creditor protections and tax advantages available through different business structures. It might be in the investor’s best interest to create an LLC or other entity and make investments through this structure. 

Returns. After funding with an inheritance, how does the investor plan to receive investment income returns? Investment income could be vulnerable to judgments and creditor claims. Investors can establish a trust or LLC to receive investment income. Tax breaks, asset preservation, and added liability protection are possible benefits that can be achieved depending on the type of trust or entity used.

Other investments. Does the heir own a company or have other investments? Strong asset protection plans are structured in ways that properly separate business interests. Understanding the investors’ unique goals and active investments can help an asset protection attorney advise a comprehensive plan, not just with the singular goal of effectively investing a large inheritance.
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