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I. Definition
The preservation phase is the length of time that you try to minimize the risk of your wealth by monitoring your plan closely in response to the changes in economy and your life style.
II. How it works
1. Change your investment strategies
a) Re-assess your risk
If you want to preserve wealth, you have to reduce the risk in your investment by placing most of your assets into long-term sustainable increases in the real value investment or guaranteed investment. The likelihood of your return would be low single digits, sometimes it is below 5%.
Unidentified risks are a far greater threat to your wealth than tax. While tax may threaten a proportion of your wealth, poorly-identified risks can destroy it all.
b) Inflation
Since inflation is always a threat to your wealth, buying real return bonds that index to inflation may be a good choice. Others may suggest to invest money in blue chip companies that have been around for a long time and have steadily increased pay-out of dividend year after year. But no matter how you choose, stock investment always carries an economic risk and unidentified risks that can destroy a big chunk of your wealth.
c) Adjust for unexpected events
In order to prevent for unexpected events, such as your employer suddenly going bankrupt, or inadequate property insurance cover, you may want to put some money into liquidate assets such as money market funds or some cashable CD or term certificate.
2. Buy universal life insurance to protect your wealth for your love one
Universal life insurance is always one of the top choices in the preservation phrase of estate planning because it not only can provide tax defers when you are alive and tax-free when you die, but it also helps to maximize your wealth by paying tax as a resulting of liquidation of other investments' gains after your death
3. Tax implications
You should always plan not to tax more than your share through careful planing.
By putting most interest return into your IRA or RRSP accounts, you save some taxes because interest always has the highest tax rate, unless you need income to subsidize your life style.
I hope this information will help. If you need more information or insurance advice, please follow my article series of the above subject at my home page at:
http://medicaladvisorjournals.blogspot.com
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
