Discover how High-Net-Worth investors leverage alternative assets to minimize their tax burdens and maximize long-term wealth preservation
The ultra-wealthy don’t just invest for returns—they invest strategically to minimize their tax burden and preserve their wealth. Want to learn how?
This guide explores how different alternative assets can offer you tax advantages, from deferring capital gains to optimizing estate planning for future generations.
Why Reducing Tax Burdens is Key for HNW Investors
The more wealth you accumulate, the bigger your tax bill. HNW investors face steep capital gains taxes, income tax brackets, and estate taxes that can significantly erode returns over time.
But traditional investments like stocks and bonds often come with taxable gains and limited deductions. That’s why the ultra-wealthy turn to alternative assets. Structured tax advantages can help defer, reduce, or even eliminate certain liabilities, making them a powerful tool for your long-term wealth preservation.
Top Alternative Investments to Reduce Your Tax Burden
Smart tax planning is key to maximizing your after-tax returns. Here’s how the ultra-wealthy leverage alternative assets for tax efficiency:
1. Real Estate & 1031 Exchanges
One of the most effective tax strategies for real estate investors is the 1031 exchange, which allows you to defer capital gains taxes by reinvesting proceeds into another qualifying property. Instead of paying taxes upfront, investors keep their money compounding within real estate holdings.
Plus, depreciation deductions reduce taxable income, even when properties appreciate in value—giving real estate investors a built-in tax advantage.
2. Opportunity Zones (OZs)
Investing in Opportunity Zones (government-designated areas encouraging economic development) offers capital gains tax deferral. If held for over 10 years, you could eliminate capital gains tax on appreciation altogether.
Imagine an investor, James, who sells a commercial property, realizing a $2 million capital gain. Instead of paying immediate capital gains tax, James reinvests the proceeds into an Opportunity Zone real estate development.
Over the next decade, the property appreciates in a big way. Because James held the investment for over 10 years, he eliminated capital gains tax on the appreciation —potentially saving hundreds of thousands in taxes.
3. Merchant Cash Advances (MCAs) & Private Debt
MCAs can give you a tax-efficient income stream while offering diversification outside traditional markets. Supervest’s MCA investments can be held in a self-directed IRA, allowing you to grow wealth tax-deferred or even tax-free, depending on the account type.
Using Alternative Investments for Estate Planning & Wealth Transfer
For HNW investors, estate planning isn’t just about wealth preservation—it’s about minimizing tax burdens and ensuring a seamless transfer of assets to future generations. Alternative investments can play a strategic role in reducing your estate taxes while maintaining long-term financial security.
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Trusts & Family Partnerships
Many wealthy families use irrevocable trusts or family limited partnerships (FLPs) to transfer alternative assets at a lower taxable value. A recent ProPublica study found that over half of America’s 100 richest individuals have used specialized trusts to minimize their estate taxes.
By gifting investments like real estate or private equity early, HNW individuals reduce estate tax liability while allowing assets to appreciate outside their taxable estate.
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Private Foundations & Charitable Contributions
Donating alternative assets—like MCAs—to private foundations can provide significant tax deductions while supporting philanthropic causes. This way, investors can reduce taxable income and lower estate tax exposure.
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Gifting Alternative Assets at a Lower Valuation
A common tactic among ultra-wealthy investors is gifting alternative assets before they appreciate.
By transferring investments when valuations are lower, heirs receive higher long-term gains while the original investor minimizes estate tax liability.
Take the Next Step Toward Smarter Tax Planning
By incorporating alternative investments into estate planning, HNW investors can protect their wealth, reduce tax burdens, and create a lasting financial legacy.
Want to learn more? Take our tax efficiency quiz, or explore our guide on how to change your current portfolio into a more tax-efficient one.
