It’s hard to save any money after taxes.
If anyone is so fortunate that they can accumulate a bit of investable money after the government takes its hefty slice off the top, they face the daunting task of how to effectively deploy what’s left without undue risk of market loss.
Sizable risks—both expected and unknown- are always present.
Many people think that if they have insurance, then those risks involving potential financial losses are muted or even eliminated.
But, protecting your future financial security and legacy involves a great deal more than just having adequate insurance coverages.
The world is full of risks including those reasonably anticipated to occurrences to others that are so remote as to be unthinkable.
Serious estate planning contemplates both known and unknown risks that are so much a part of everyday life.
David Hand, the author of the “Improbability Principle,” discusses how events which are incredibly unlikely keep on happening. He notes, “…they just keep on happening, time after time.”
His book explains that we should expect the unexpected, and why.
Human beings are not particularly well-suited to make intuitive decisions about future events where our basis for making judgments involves incomplete or imperfect information.
Leonard Mlodinow, who wrote “The Drunkards Walk”, explains why people’s thought processes are often seriously flawed.
He observes that we create our world view from our past education and experiences which then become the filter for processing our perceptions.
Research shows that when new random events occur, our thought processes are often seriously flawed.
Even the most brilliant and educated experts make massive errors in judgment in dealing with uncertainty. The guys from Long Term Capital and their spectacular failure are just one of many examples of erroneous decision making that happens with incredible regularity.
As Mlodinow says, “We habitually underestimate the effects of randomness.”
“A lot of what happens to us--success in our careers, in our investments, and in our life’s decisions, both major and minor—is as much the result of random factors as the result of skill, preparedness, and hard work.”
Ability does matter, “but the connection between actions and results is not as direct as we might like to believe.”
Sophisticated estate planning techniques have been developed to deal with managing risks however they may occur.
It is unknown at this moment what lawsuit you will be facing in the future, but strategic planning can be utilized now to deal with the potential of losses from legal liability from whatever its future source.
Physical assets, as well as intellectual assets, are always at risk of somehow being stolen, embezzled, or misappropriated. Using the right tactical techniques can reduce or eliminate this form of risk exposure.
Anything involving human beings presents risks. People are predictably irrational and do foolish things which many times are even against their self-interest. Deliberate steps and protocols can be put in place to anticipate that individuals will if given a chance, present problems.
Protecting wealth and a legacy is not just a matter of reducing tax exposure on a lifetime accumulation of money.
A commitment to financial, legal, and human risk management is critical to creating the successful estate plan.
Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.
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