Beginning wealth accumulation can be a stressful phase in your lifetime and the pressure that comes with growing your wealth grows with it. Many people may find themselves starting a strategy to deal with high-priority action items, but aren’t able to see how everything works together.
Whit Batchelor, Senior Vice President and Client Advisor at Whittier Trust, explained how a balance sheet approach to wealth may be quite beneficial in this situation. This method examines everything you own—investment assets, company holdings, and real estate assets—from a broad viewpoint, ensuring that your money stays an asset rather than a liability. Here’s how using a balance sheet strategy might help you manage your finances.
It Creates A Path Toward Your Goals
As you focus on wealth accumulation, it’s easy to get caught up in the next quarter’s details and lose sight of the bigger picture. Working with a wealth management advisor who can help lead you into the next steps.
Everyone has different goals, whether it’s to continue wealth accumulation for their children or any other scenario. Regardless of the circumstances, using a balance sheet approach to understand how to achieve long-term goals and what can get in the way is critical. Many individuals, according to Batchelor, view their wealth in silos, which could overlook potential avenues toward goal achievement.
An investment manager may focus primarily on your financial portfolio if you’re considering charitable donating. A balance sheet method, on the other hand, would consider all of your assets, such as highly prized real estate, art, and other privately-held investments. According to Batchelor, These are tax-advantaged feeders to philanthropic endeavors that may be overlooked. In some cases, charitable remainder trusts or spousal limited access trust tactics are necessary to maximize gifting and minimize estate taxes.
Streamlining Saves Time And Money
Ad hoc solutions might turn into costly, overlapping accounts over time, draining resources, resulting in additional fees, and adding to the complexity. In the worst-case scenario, it might cause illiquidity, locking up your funds and limiting your cash flow alternatives just when you need them most. Batchelor recalls one client who had built a family business and, over time, set up multiple asset protection trusts.
Batchelor had to help take the client take a step back and assess a few parts of his plan, including asking ‘Well, how will you access the money if you need it?’”
Batchelor adds that other advisors set up the structure, but the client didn’t know how to access the money along with the plan not having any true way of achieving the goals for the funds. The lack of the client’s planning trapped him in a hard-to-understand system.
Batchelor states, “Our clients are financially savvy; they know money,” but their intelligence can lead to over complex situations that don’t play out the same way they do on paper, causing them to run into problems in terms of liquidity, estate planning, and lifetime gifting.
A Solution That Works For You And Your Beneficiaries
Your financial decisions now will have a long-term impact on future generations.
Consider estate planning early in your career to ensure that flexible, sensible arrangements are in place to satisfy your current demands—and the requirements of your heirs in the future.
Financial decisions can become automatic for many high-net-worth individuals. A complicated balance sheet, on the other hand, might benefit from an unbiased counsel who can see the broader picture at some point.
After you’ve grown your wealth, it’s important to ensure that all of your resources are working for you. Using a balance sheet approach allows you to understand what you have and how you create a plan to watch your wealth grow and see financial goals be achieved. For more information, you can download the full report here or visit Forbes to read more.
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