I Asked ChatGPT How Billionaires Safeguard Wealth — Anyone Can Use These Tips

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Just over 3,000 known billionaires exist today, according to Forbes. It’s an impressive number, especially considering there were just 2,000 billionaires in 2017.

If you’ve ever wondered how the ultra-wealthy protect their wealth, you might be surprised to find that many of the same strategies they use are applicable to your own life. You don’t have to have a 10-figure net worth.

GOBankingRates asked ChatGPT how billionaires guard their wealth. Its response: “Billionaires don’t just make money — they also work very strategically to protect it.”

This involves using the following main legal tactics that, surprisingly, anyone can use.

Diversify More Than Your Portfolio

Portfolio diversification mitigates risk while maximizing returns. It’s common enough advice, while also being sound, so it’s no surprise that it’s the first tip ChatGPT provided. As for what to diversify into, options include:

• Stocks and bonds
• Private companies
• Venture capital
• Real estate
• Commodities like gold or energy
• Collectibles
• Art
• Hedge funds
• Private equity funds

But don’t limit yourself to your portfolio. You may also be able to diversify in other ways to reduce risk. Billionaires, according to ChatGPT, often have residences in several countries, foreign bank accounts and overseas investments.

“[Billionaires] also invest internationally to reduce country-specific risks,” said Andrew Latham, Certified Financial Planner, at SuperMoney. “Ray Dalio, for example, has spoken publicly about holding gold and investing globally to hedge against inflation and political instability.”

Obviously, not everyone can own multiple residences across the globe, but if you have multiple citizenships, you may find it useful to take advantage of tax structures and buying opportunities unavailable to citizens of another nation.

Set Up a Trust

As per the AI tool, another way billionaires protect their wealth is through trusts: irrevocable trusts, grantor retained annuity trusts and dynasty trusts. With the right trust structure, they can not only safeguard their assets from potential lawsuits or creditors but also ensure they have something to pass down to their descendants.

You don’t have to be ultra-rich to do this. OC Elder Law estimates the cost of setting up an irrevocable trust to be $1,500 or more. Revocable trusts usually start at around $1,000.

Setting up a trust might be a good idea if you face significant tax liabilities. Say, for example, you’re a small business owner. Setting up an irrevocable trust for your business could lower estate taxes and protect your business for your heirs.

Have an Estate Plan

Estate planning is a key way that billionaires protect their wealth, and anyone can do it. If you have multiple beneficiaries and want to ensure they’re getting the most possible while avoiding unnecessary legal or court fees, estate planning is vital.

“With rising costs, in many states, probate and legal fees can consume a meaningful portion of an estate, often thousands or even tens of thousands of dollars, that could have been avoided with an estate plan,” said Renee Fry, CEO at Gentreo, Inc. “Family fights can be avoided. Clear direction lets the courts know what you want to happen.”

Set up a Holding Company or LLC

As ChatGPT pointed out, billionaires often only indirectly own their assets — usually through things like limited liability companies (LLCs), family limited partnerships or holding companies. Among other things, these legal structures offer tax optimization and liability protection.

If you’re an entrepreneur or business owner, you can do the same. The typical cost of setting up an LCC is just $132, according to LLC University.

Strategic Tax Planning

There are all sorts of tax deductions and credits to lower your tax liability. But there are more advanced strategies, which are also legal, that billionaires use to protect their wealth. These include:

• Borrowing against assets instead of selling to lower taxable income
• Using capital gains rates instead of income tax rates
• Relocating a primary residence or business to a low-tax jurisdiction
• Using tax-advantaged accounts to defer taxes

Non-billionaires can do much the same. For example, you can contribute up to $7,000 in an IRA ($8,000 if you’re 50+) for upfront or deferred tax benefits (depending on the account).

As for net capital gains, the IRS reports that most individuals don’t get taxed more than 15%. Capital gains rates generally range from 0% to 28%, which depending on your income may be lower than individual income tax.

Have a Team of Pros

As per ChatGPT, billionaires usually work with a large team of experts. This may include wealth managers, tax attorneys, accountants, lawyers, estate planners and investment advisors.

While the average non-billionaire might not have the funds — or need — for all these experts, it doesn’t hurt to have a few on hand. For example, an accountant could potentially save you more on your taxes than you ever would alone — a profit well worth their fees.

Get Insurance

Whether you’re a billionaire or not, insurance can be vital to protecting your assets. As ChatGPT pointed out, billionaires often use large insurance policies to safeguard their wealth against huge losses.

As for which insurance policy to use, that’s dependent on the individual’s needs and circumstances. Some options include umbrella liability insurance, property insurance and specialized insurance (for assets like art or yachts).

According to Progressive, umbrella insurance might be good to have if you have major assets, as it offers extra liability protection your normal policy might not. Say your homeowners insurance policy only covers $500,000 in liability protection, but something happens that makes you responsible for $700,000. An umbrella policy could protect your assets.

Prioritize Privacy

ChatGPT pointed out that part of protecting one’s wealth, whether you’re a billionaire or not, means protecting oneself. This might be through a cybersecurity system or private security team. But it’s also about limiting exposure of your personal information.

“Billionaires value privacy,” said Fry. “You too can take advantage of tools like a living trust which can bypass probate all together, while keeping your assets and choices out of the public forum as wills are open to the public after you pass away.”

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