Strategies to Help HNW Women Plan Their Financial Legacy and Protect Their Families

We’re in a transitional era for high-net-worth (HNW) women. Research indicates that HNW women are asserting a different relationship with their wealth than seen in previous generations. HNW women today see their wealth as a responsibility and opportunity to be utilized for personal improvement and a means to serve the community in ways that resonate with their values. However, there still appears to be a gender-specific financial education gap, with financial literacy being lower in women on average.   

Despite this gap, a major trend we’re seeing in the industry is HNW women taking more responsibility in preparing the next generation, conducting open conversations about wealth management, and proactively working to protect their financial legacy. This shift is changing the financial planning needs and the relationships between HNW women and their financial advisors. Tax advisors, insurance agents, and financial planners must be better prepared to work collaboratively and openly to assist HNW women achieve their goals.1 

 Financial planning considerations for HNW women 

While men and women are broadly aligned on many goals in their financial planning, there are some specific differences that financial professionals may wish to consider. Women have longer life expectancies than men, which adds to the complications of ensuring a financial legacy. Currently, women aged 65 (a common target age of retirement) are expected to live three years longer than 65-year-old men.3 The life expectancy gap may lead to more inherited wealth for women who may not have been as involved in financial planning prior to the inheritance.  

 Legacy protection with life insurance 

It makes sense to include life insurance near the top of the list in legacy protection tools, but advisors may be reluctant to allocate funds towards life insurance that could otherwise be invested in the market. Life insurance is often conflated with investing, but it should not be viewed as a cash vehicle. HNW women should understand it as a separate asset class to protect the estate and the family down the road. Insurance agents and financial professionals should be prepared to collaborate to ensure an appropriate balance between insurance premiums and market investments.  

 When considering life insurance, clients should focus on the needs for family, business, and estate protection. For instance, in a high-net-worth family, the premium savings of a term life policy may be outweighed by the permanence advantage of a whole life or universal life policy. Other important policy considerations for high-net-worth women include:  

 Ownership Structure: It’s important to assess individual ownership, joint ownership with a spouse, or ownership by a trust, to optimize tax efficiency and asset protection. 

 Tax Implications: Clients should understand the tax implications of life insurance policies, including potential estate tax considerations, income tax treatment of policy proceeds, and strategies for minimizing tax liabilities. 

 Premium Financing: Evaluating the option of premium financing for life insurance policies, particularly for larger coverage amounts, and assessing the associated risks, benefits, and overall financial objectives can help optimize the client’s use of cash.   

Securities and retirement accounts  

Investment accounts should work in concert with life insurance policies, instead of opposing each other. Investments in stocks, bonds, and mutual funds are often an appropriate strategy to address retirement and lifetime liquidity needs while growing a financial legacy.   

Meeting the challenges of integrating increased life expectancy into financial strategies and ensuring adequate protection may mean encouraging greater participation in an available defined benefit or defined contribution plan through employers. HNW women who have self-created their wealth through their own businesses may have opportunities to establish these plans, which can aid in tax efficiency and can help balance the illiquid equity in a business and liquid retirement savings.   

Advocating for a collaborative approach and continued financial education 

HNW women are well-served by professionals who advocate for a transparent, team approach to financial planning, ensuring advisors, CPAs, and attorneys are aware of each other’s roles, advice, and strategies. This also allows for a coordinated approach to risk management, reassessment of insurance and asset allocation needs, and stress-testing of legacy protections.   

As financial professionals learn to collaborate in ways that better serve HNW women, we can also advocate for more participation of women in financial services careers to broaden the representation for the women we serve. From first-hand experience, I am proud to have seen my own daughter Morgan, who is the VP of Sales at Goheen, become a sharp, dedicated financial professional in our firm. Her detail-oriented and collaborative approach is a clear indication to me that financial outcomes can improve when women are well-informed, lead with their values, and take a larger role in financial planning.   

A well-planned financial legacy can ensure your money and your values make a lasting impact, but it is a complex process that requires collaboration. If you have questions about how to build and protect your legacy, contact a financial advisor or insurance professional who specializes in estate planning and asset protection.  

Written by Shawn Goheen.

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