Do you know the secrets of the Wealthy?
Do you know the THREE CYCLES of WEALTH that wealthy people apply every day?
Do you know the secrets to using these cycles to build your wealth?
THE THREE CYCLES OF WEALTH
For as long as mankind has been aware of the concepts of wealth, there are three cycles of wealth that have been proven to be true:
- Accumulation
- Preservation
- Transfer
Each of these cycles has a unique aspect in relation to your ability to build and have financial wealth. Each cycle comes a very different set of principles that, if followed, will guide you successfully each day to your desired goal to have a financially secure wealthy life.
Wealth Accumulation
The term wealth accumulation is defined as adding more to that what you already have. So if you are adding physical gold to your wealth plan, using this principle you would want your plan to include ways to “add” more to that which you already have.
Wealth accumulation is NOT about making more money, but instead, it is about adding more to what is defined in your wealth plan. The true accelerator to wealth accumulation is when you understand the power of using the tax code to your advantage. You can create momentum far and above any other form of wealth accumulation in that tax savings when added to the accumulation have a force multiplier that increases your ability to accumulate wealth.
Wealth Preservation
The term wealth preservation is defined as preserving those that you have already accumulated. This means you want to preserve, protect, defend and guard what you have accumulated against debt, taxation, dilution, erosion, inflation and loss.
In the realm of tax policy, we use again the provisions of the tax code to provide us with ways to preserve wealth by mitigating tax exposure or preserving financial resources. We employ the use of entity structures such as corporations, LLCs, trusts, partnerships and tax elections that give us again a force multiplier in terms of our ability to preserve further what we have accumulated. In addition, certain types of insurance give us means to preserve, to protect our wealth, and to guard against loss.
Wealth Transfer
The term wealth transfer is defined as the ability to transfer one’s wealth free from dilution of estate tax, probate, or invalid claims by third parties against our estate. In the event of death or disability, we always want to consider the eventual end of what our desire is to transfer our wealth in whatever form to whomever we choose. We want also to do this in a manner free as best we can from the perils of taxation, probate and claims by third parties that would dilute our ability to transfer as much of our wealth in a manner we decide.
We employ a variety of provisions of estate tax law and use tools such as family limited partnerships, corporations, trusts and the like to enable us to control as much as possible our ability to transfer our wealth however we choose. As part of that desire, we must learn that, in the 21st century, we need to be aware of new concepts that could impact our ability to transfer our wealth if, in the definition of wealth, we do not include for example our digital assets. Every online account you have and create and every Internet-based business you own has significant digital assets. If you fail to plan for these assets and their disposition, your heirs will likely discover a serious road block to access or dispose of the very assets that help create the wealth to begin with.
Understanding the cycles of wealth empowers you to properly allocate and plan for how you will build a wealth plan and how each cycle in wealth has unique attributes that allow the tax code to be a powerful tool as part of the overall planning process. Failure to understand these cycles and the intra-relationship of tax law will by all measure dilute your wealth in the cost you bear in taxes you pay regardless of the value of your estate.
