What are Alternative Assets?

Alternative assets encompass a diverse range of investments beyond traditional stocks and bonds. These include:

• Private equity
• Real estate
• Hedge funds
• Fine art
• Collectibles
• commodities

These assets can provide growth opportunities, reflect personal values, preserve wealth, and create meaningful stories for future generations.

The Role of Alternative Assets in Legacy Planning

Legacy planning extends beyond simply leaving an inheritance; it encompasses how wealth is transferred and the values it represents. For high-net-worth families, this often involves building a portfolio that reflects their values, long-term vision, and resilience across generations. Alternative assets can play a crucial role in achieving these goals.

Steve Branton, CFP and managing director at Wealthspire Advisors, notes that alternative investments can help reduce volatility, decrease market correlation, and support long-term overall growth, which usually aligns well with the multi-generational goals of wealth preservation.

Though,like all investments,alternative assets carry risks. They are frequently enough less regulated and less liquid,meaning they can be harder to sell quickly. These characteristics, while posing challenges, also contribute to their unique potential.

A tailored portfolio increasingly reflects personal values and interests, not just financial returns. Before investing, consult a financial advisor to ensure alignment with your overall financial strategy.

Real Estate: Building a Tangible Legacy

Real estate offers a tangible asset that can appreciate over time and provide a steady income stream. from family homes to commercial properties, real estate investments can form a meaningful part of a legacy plan.

Farmland, in particular, can be a valuable asset.It provides not only financial returns but also a connection to the land and a potential source of sustainable income for future generations.

Fine Art: Investing in Beauty and value

Art is not only aesthetically pleasing but also a store of value. Families with an interest in culture and history often acquire art as a reflection of their tastes and as a symbol of wealth. Owning a Picasso or Monet can be a significant statement.

however, it’s crucial to consider the tax implications of owning fine art. These assets may build up large unrealized gains. If not planned properly or sold at the wrong time, they can trigger significant capital gains or incur estate/gift taxes…in some cases, it may be best to hold private equity or fine art until death, when the basis can be stepped up and the asset can be sold with little to no capital gains, says Branton.

Commodities: Foundations of the Global Economy

commodities like gold, oil, and wheat are fundamental to the global economy and can diversify a legacy plan. While not entirely immune to inflation and geopolitical uncertainty, certain commodities have historically maintained their value over time.

these tangible, globally traded assets can serve as a store of wealth during currency fluctuations or economic shifts. Timing and allocation are crucial for maximizing their potential.

Collectibles: Turning Hobbies into Investments

Hobbies like collecting wine, classic cars, or vintage watches can evolve into valuable investments. However, it’s crucial to be aware of the challenges involved.

Be aware there could be valuation and liquidity challenges; illiquid assets like private equity and art can be hard to value and/or sell, which can complicate estate governance and ultimately delay any distributions, Branton advises.

While collectibles may be less liquid and harder to value, they add diversification, a sense of personal connection, and a family legacy. A watch passed down thru generations can hold significant sentimental value, often exceeding its monetary worth.

The Bottom Line

While traditional assets remain essential,alternative assets offer families a way to build a legacy that goes beyond financial returns. It’s about creating meaning, establishing identity, and making a long-term impact.

From fine art to farmland,these investments can reflect a family’s values and passions,while also crafting stories and traditions that span generations.