What qualifies someone as a high-net-worth individual?<\/p>\n
To qualify as a high-net-worth individual, you must have at least $1 million in liquid assets after debt and other liabilities are factored in. Liquid assets should be easily accessible and not tied up in property you must sell, like antiques or real estate. They can include cash, stocks, bonds and retirement savings.\u00a0<\/p>\n
While cash is considered a qualifying asset, being an HNWI isn\u2019t just about having a high salary. You could carry a lot of debt or struggle to build wealth and can be referred to as a high earner, not rich yet (HENRY<\/a>).<\/p>\n How HNWIs approach investing differently<\/p>\n High-net-worth individuals have the same stresses and worries as other investors, says Marcus Sturdivant Sr., managing member at financial planning firm The ABC Squared. \u201cBoth Wall Street and Main Street seem to be coming together to take more care in looking at what they own and what they\u2019re invested in.\u201d<\/p>\n However, there is a difference in how each group approaches investing.<\/p>\n Unlike typical investors, who are focusing on building wealth and growing their assets, those who have a high net worth tend to focus more on preserving their wealth and legacy for their lifetime and beyond.<\/p>\n What really differentiates how HNWIs invest is what they\u2019re able to invest in. Those who have at least $1 million in liquid assets qualify as \u201caccredited investors\u201d authorized by the Securities and Exchange Commission (SEC). This designation allows them to access private investments that are not available to the general public, such as hedge funds, angel investments, private equity funds and venture capital funds. The SEC restricts access to these investments to protect average investors from the significant risk these offerings pose. An accredited investor better understands the posed risks and can make an educated decision to invest without all the information or transparency available.\u00a0<\/p>\n Along with private investing, individuals with high net worths are more apt to put their money into asset types beyond the common options of stocks, bonds, high-yield savings accounts<\/a>, exchange-traded funds (ETFs), retirement accounts and certificates of deposit<\/a> (CDs).\u00a0<\/p>\n According to a 2025 study by the SEC<\/a>, accredited investors were almost twice as likely to own precious metals and almost four times as likely to own rental property as non-accredited investors. Cryptocurrency is also a less common asset that Sturdivant sees many high-net-worth individuals invest in. He says more affluent investors may own these types of assets to protect against economic uncertainty and cash in on the bull run that assets like gold and bitcoin had in recent years.<\/p>\n Tax strategies common for high-net-worth individuals<\/p>\n Investors with higher net worths typically aim to minimize tax liabilities that might be associated with higher incomes and capital gains, as well as estate and gift taxes. To do that, there are a few common tax strategies they might employ:\u00a0<\/p>\n Tax-loss harvesting: The tax-loss harvesting strategy<\/a> helps offset capital gains by selling assets that are worth less than what the investor initially paid for them. Since this is considered a loss, it lowers the amount you have to pay on any gains you received by selling investments at a higher price than you paid. You can deduct up to $3,000 from your income ($1,500 for couples filing separately) annually. If your capital losses exceed that amount, you can carry the remaining amount over the following years.Trust contributions: By putting assets in an irrevocable trust, you remove those assets from your ownership and reduce your taxable estate.Real estate investing: Investing in real estate can provide income and diversify your portfolio, plus it can also provide tax write-offs that can lower your taxable income. Expenses that might be deducted include mortgage interest, maintenance and repair costs, property taxes and marketing expenses. You might be able to further reduce tax liability through benefits like depreciation and incentive programs.\u00a0Charitable giving: You can lower taxable income by deducting charitable contributions<\/a> made directly or through a donor-advised fund. Donors can provide cash, property or investments to charitable organizations, with the ability to deduct up to 60% of their adjusted gross income, depending on the donation.<\/p>\n Tax laws change regularly and might vary by state, so it\u2019s important to speak with a tax attorney or financial advisor to implement a tax strategy that works best with your individual financial situation.\u00a0<\/p>\n Estate and legacy planning for HNWIs<\/p>\n \u201cThe biggest concerns with estate planning are going to be taxes, where your assets end up and [who gets] control,\u201d says Sturdivant. \u201cMoney is either going to someone you don\u2019t want, it\u2019s going to the state or it\u2019s going to the people you want it to go to.\u201d<\/p>\n Estate and legacy planning is crucial for high-net-worth individuals to preserve their wealth for years to come. The right legacy planning ensures assets are distributed correctly without conflict and protects a family\u2019s assets and wealth while minimizing tax liability.\u00a0<\/p>\n High-net-worth individuals require strategic estate planning by a financial advisor<\/a> since they are dealing with more complex needs, including:<\/p>\n Organizing a greater number and more diverse mix of assets to pass alongEnsuring business continuityTransferring wealth across multiple generationsAvoiding higher taxationKeeping financial and other private information out of the public eyeContributing wealth to a charity or nonprofit that makes a difference in the lives of others and ensures a lasting legacy<\/p>\n Estate and legacy planning will likely include:<\/p>\n