Protecting your wealth: seven strategies for high-net-worth investors

Looking for ways to enhance the tax efficiency of your hard-earned assets? There are multiple strategies worth considering. In this article, we'll explore seven ways to secure your assets, from trusts to specialist insurance. So you'll finally have all the tools to protect what's yours.

1. Asset Protection Trust (APT)

An Asset Protection Trust (APT) outlines who your assets will be allocated to after you pass. Its purpose is to protect your assets against potential risks, such as lawsuits, creditors, and divorce settlements. It can also protect vulnerable beneficiaries, such as a family member with a disability, from financial abuse.

By creating an APT, you'll ensure the assets are distributed directly to beneficiaries once you're gone. This type of trust can include high-value items, investments, property, and cash exceeding £14,250.

2. Family Asset Protection Trust (FAPT)

A Family Asset Protection Trust (FAPT) lets individuals or families transfer ownership of their assets to a separate legal entity, which is managed by a trustee. The primary goal of this type of trust is to protect assets from potential creditors, lawsuits, divorce settlements, and other financial challenges.

You can contribute to the FAPT fund throughout your lifetime, and all assets within it are legally owned by the trust rather than by you. Upon passing, the trust hands over the assets to your beneficiaries. This type of trust can be especially useful for preserving family wealth across generations. It ensures that assets remain intact and accessible for beneficiaries, while minimising the impact of external financial threats.

3. Limited Liability Company (LLC)

If you’re looking to start your own business, setting up a Limited Liability Company (LLC) can protect your personal assets from being claimed by creditors. Forming an LLC helps you maintain a clear separation between your business finances and personal finances. This set-up safeguards your personal belongings, including your home and savings, in case your business faces financial challenges or lawsuits.

By isolating assets from business risks, you're better positioned to maintain and grow your wealth over time. As with any legal and financial decision, speaking with a financial adviser helps you to protect your assets from business liabilities.

4. Family Limited Partnership (FLP)

For families with significant assets, exploring a Family Limited Partnership (FLP) can provide dual benefits of asset protection and tax reduction. This strategic approach has become a popular form of asset protection for high-net-worth individuals. It combines elements of a limited partnership and estate planning, to facilitate the management and transfer of family assets.

There are two key roles to this type of partnership:

• General Partners: Usually family members who have control over assets and operations, making decisions, and managing assets while taking personal liability for obligations.
• Limited Partners: Family members investing in the partnership with limited decision-making power and liability. They primarily contribute capital and gain from asset appreciation and income potential.

General Partners have control over managing and making decisions for the partnership. This control allows for strategic asset management, reducing the risk of financial mismanagement or reckless decisions that could jeopardise assets.

Limited Partners typically have limited liability, which safeguards their personal assets from business-related debts or legal claims. Creditors usually can't target Limited Partners' personal wealth to settle partnership-related debts.

5. High-net-worth insurance

High-net-worth insurance is a specialised type of insurance designed to provide comprehensive cover for individuals with substantial assets and complex insurance needs.

This insurance extends beyond standard policies, providing customised protection for high-value homes, vehicles, fine art, jewellery, antiques, and other assets that might not be adequately covered by traditional insurance plans.

Due to their financial status, high-net-worth individuals often face higher liability risks. These policies can offer higher liability cover limits to protect against potential lawsuits and legal claims.

6. Asset allocation strategies

Diversifying your assets across different classes and markets can reduce your level of risk, and protect your wealth against market volatility. Allocating your money across different types of financial assets (such as cash, stocks and shares, property, and bonds) can give you the reassurance that if one loses value, the others should be unaffected.

Market changes over time can impact the value of your assets. To protect your portfolio’s value and encourage growth and return, consider rebalancing it. Rebalancing your portfolio is essential to maintaining your original investment plan. It helps you stay on track with your investment strategy, regardless of how the market behaves, reducing investment risk and smoothing out volatility.

7. FSCS protection

The Financial Services Compensation Scheme (FSCS) protects investors from losing some or all of their cash if their provider collapses.

If you keep your money in a UK bank, building society or credit union that fails, the FSCS will automatically compensate you:

• up to £85,000 per eligible person
• up to £170,000 for joint accounts

Diversification is one of the most popular ways to manage risk when it comes to investing, and it's no different when it comes to saving. If your cash balance is over £85,000, you'll need to divide it up and put it in different banks for maximum cover.

Our cash deposit platform simplifies the process. You can spread your cash across different banks, all from one place. Enabling you to gain the greatest FSCS protection.

Curious to explore how we can enhance your savings?

Get in touch with Flagstone today