Wealthy individuals seek to protect and grow their assets by using a number of investment vehicles. When used in conjunction with one another, a portfolio is strengthened against unforeseen changes in the value of domestic currency, difficult and changing tax environments, and the slowdown of traditionally performing stocks. When interest rates are low domestically, wealthy individuals look to international accounts to retain capital gains and interest.

Due to the crisis of 2009, investors look to hedge against any future crisis that may dramatically affect traditional portfolios. Income-producing investment products such as bonds and real estate investment trusts (REITs) have become more popular with investors, although these products have always been popular with the ultra-rich who use them to preserve principal while augmenting income. Estate taxes are a problem that only the ultra-rich encounter, so they have developed strategies that help mitigate against these large future expenses.

Trust Funds

Trusts are a common method of eliminating or reducing gift and estate taxes that otherwise would be due by wealthy individuals. To protect and grow assets for the benefit of children, organizations, charities and others, trust funds create tax-advantageous environments for the growth of money. Each trust fund is structured differently based on the needs of the recipient. Legally, a trust fund is its own entity and requires its own tax return.

There are simple and complex trusts. Trusts that distribute income all at once are considered to be simple trusts, while complex trusts distribute a portion of income at one point in time and then another portion at another date. There may be more than two distributions in a complex trust. Trust income is taxed to the recipient of the funds at the time of distribution rather than to the trust manager.

Recipients of trusts are often in a different tax bracket than the trust itself. Trusts were famously used by the Rockefellers to distribute funds to family members. As of 2015, the highest bracket on the earnings for trusts is higher than the highest bracket for personal income in the United States. It's an advantageous tax strategy to distribute earnings from trusts to save on the tax bill of the trust's earnings.


Undervalued REITs have served as major plays for a number of famous portfolios, including that of Carl Icahn. REITs have different business cycles from traditional stocks. As a result, their performance can be used to offset the performance of equities that are more sensitive to the economy.

Investment into a REIT is a method of owning a stake in the real estate market without having to purchase land or buildings. Current regulations on REITs require that 90% of income is paid to shareholders in the form of dividends. In exchange for this accounting structure, REITs are given special tax breaks that aren't available to other publicly traded companies. REITs may specialize in mortgages or commercial real estate, or they may combine both in their portfolios.

Life Insurance

Estate taxes are a burden to the wealthy in the United States. While the exclusion amount that may be passed on to inheritors tax-free has changed from year to year, in 2015 the value of an estate in excess of $5.43 million is taxed at a maximum rate of 40%. This only applies when the estate is to be passed on to an individual or entity other than a spouse or a charity.

A 40% tax bill on the total value of an estate can seriously injure the total amount of funds transferred to children or other entities. While there are many strategies that wealthy individuals in the United States may employ to reduce the value of an estate to reduce a future tax bill, one financial product that can reduce the value of an estate is a life insurance policy structured to cater to these specific needs. By declaring another individual such as a child or another relative as the owner of a life insurance contract, the life insurance policy is not included in the taxable estate of the deceased individual and the life insurance benefit can be used to pay all or a portion of the projected tax bill.

Life insurance is also commonly used as part of a tax strategy in other instances, such as when a person's total income needs to be reduced.

Foreign Bonds

While currency exchange rates fluctuate worldwide along with international interest rates, foreign bonds offer an opportunity to investors to generate interest payments in established and emerging economies that could be higher than what is currently available in American bonds.

Foreign-pay bonds are issued in the currency of the originating country. Although some of the bonds that are available for purchase on the international market have lower credit ratings than what is found on American bonds, these are attractive investments to wealthy individuals because they offer additional tax diversification. Each country has its own rules on taxes placed on bond yields, and some countries do not have any taxes on bond yields for foreigners. This can be a very attractive feature for wealthy investors. The interest earned on government bonds in Italy is taxed at 12.5% as of 2015, which is half that of Austria's tax of 25%.

Foreign Savings Accounts

Similar to foreign bonds, foreign savings accounts can offer higher interest rates in to investors and may make more convenient vacations overseas where the savings accounts are held. Though these accounts hold the same foreign exchange risk as foreign-pay bonds, investment into a foreign savings account is one way to hedge against a weak or declining dollar.

Some domestic banks offer investors the opportunity to place funds into foreign certificates of deposit (CDs) without the need to exchange funds into a foreign currency. In other cases, an investor can place funds directly into a foreign savings account through communication with a particular bank overseas.

Wealthy investors are known for keeping funds in foreign accounts, and the amount of money kept in accounts such as these reaches well into the trillions of dollars.

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