How to Maximise Holistic Wealth Protection Plans Beyond Insurance?
Key Takeaways:
Whether through a successful career or smart investing, you may have been able to build personal wealth. However, protecting your wealth is as important as growing it, as economic uncertainties or unexpected events can take you off track anytime. Read more to learn about holistic wealth protection strategies to secure financial stability.
Estate Planning Essentials
Estate planning in India forms the foundation for a robust wealth protection strategy. This ensures that asset distribution is completed correctly if something happens to you and minimises burdens for your loved ones.
Here are some of its essential components:
Wills and Trusts
While a will outlines how you want to distribute your wealth upon your demise, trusts transfer assets even before your death or after it. In other words, wills and trusts help you control how and when your assets are distributed.
Nomination
Nomination is the process of designating beneficiaries for your financial assets, such as retirement accounts, life insurance policies, and other investments. This speeds up the inheritance process and minimises potential disputes.
Capital Protection Investments
To safeguard your wealth, you can consider investing in capital protection funds. These refer to close-end hybrid funds that seek to provide equity-oriented returns while providing security during market downturns.
Capital protection investments generally allocate 80% of the investment amount towards fixed-income instruments like bonds, certificates of deposits, and treasury bills. The remaining portion of the fund is allocated towards equity-oriented instruments.
Preserving Generational Wealth
For preserving generation wealth, legacy planning needs to be a crucial component of your financial proposal. The following are a few things to keep in mind:
It ensures a seamless transfer of wealth according to your preferences, avoiding complications that can arise from intestate succession laws, cross-border taxation, disputes, delays and unintended beneficiaries.
By having a clear plan in place, you can prevent assets from being tied up for extended periods, ensuring a timely and efficient distribution for future generations.
By efficiently structuring your assets, you can ensure the security of wealth for future generations. This can be done by executing a wealth transfer with genuine intentions.
Combining Insurance with Broader Planning
You may encounter several unexpected events in your lifetime. In such testing times, life insurance can provide a financial safety net. Check how you can use insurance as part of your holistic wealth protection strategy:
This comes with a death benefit that a beneficiary receives upon the demise of the policyholder. By taking life insurance, you can secure the financial future of your loved ones even if you are not around.
Your earning potential may be significantly impacted in case of an unexpected disease or injury. Disability insurance ensures that your family do not suffer if you are unable to work.
Due to rising healthcare costs, unexpected medical expenses may burn a hole in your pocket. In such cases, having health insurance pays, as it offers financial assistance with these services and costs.
Frequently Asked Questions
1. Why is estate planning important if I already have insurance?
Life insurance can provide financial support to your beneficiaries. However, estate planning ensures that your assets, such as property, investments and savings, are distributed according to your wishes.
2. What’s the difference between a will and a trust?
A will is a legal document that outlines how your assets should be distributed after your death. It only takes effect upon your passing. However, a trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. It can take effect immediately, even during your lifetime.
3. Which capital protection investments are available in India?
Among others, some of the capital protection investments in India include:
4. How do I ensure my wealth is passed on smoothly?
You can consider opting for wills and trusts to pass on your wealth to the desired beneficiaries. Moreover, for your retirement accounts, life insurance policies, and other investments, ensure that you designate a nominee.
5. Do I need professional help for a holistic wealth plan?
Yes, seeking professional help for a robust wealth plan is highly recommended. You can manage some aspects of your finances independently. However, a comprehensive wealth plan often involves multiple aspects, such as investments, tax planning, retirement planning, estate planning, insurance, and risk management.