Most people will perform some type of wealth structuring throughout their lives, be it transferring assets to friends and family, or investing in a pension. For entrepreneurs, the process can be more complex, as there are often multiple business interests and investments to consider. Attorney-at-law Dr Edgar Paltzer specialises in wealth structuring as part of his legal practice. There are three key areas of wealth structuring that entrepreneurs may want to consider: planning for retirement; diversifying a portfolio; and preparing for wealth transfer. The embedded infographic looks at some of the most common types of wealth structuring services available.
Planning for Retirement: Pensions and More
Entrepreneurs who own successful businesses often believe that their business will generate enough income to fund their retirement. They devote most of their professional energy to running their business, and often pension planning takes a back seat. However, for a comfortable retirement, even the wealthiest of individuals will benefit from sound pension planning.
People retire early for a variety of different reasons, key among them health, family, and business factors. Ensuring there will be enough money to fund a comfortable lifestyle after retirement is therefore essential. Selling a business to fund retirement may also be an option, although many entrepreneurs who have started family businesses will instead want to pass the mantle on to a younger family member. This PDF explains more about retirement planning.
Portfolio Diversification
Another essential component of wealth structuring in portfolio diversification. It is not unusual for small business owners to have the majority of their wealth tied up in one asset. When planning for the future, it is vital to diversify at least some of that wealth to protect from risk. In the event of an economic or market downturn, wealth that is tied up in a single asset may decrease significantly. Taking a proportion of that wealth and investing in other market sectors can help ensure that, even if the primary business has difficulties, there is still sufficient income to maintain a comfortable lifestyle both before and after retirement.
Preparing for Wealth Transfer
Preparing for wealth transfer may involve setting up a trust for children or grandchildren, transferring assets during the founder’s lifetime to maximise value for the recipient and reduce the tax burden, or any one of numerous instruments to ensure wealth is passed on. This short video explains what legacies are and how they are passed on.