As we approach 2025, high net worth individuals (HNWIs) are facing a rapidly evolving financial landscape shaped by changing tax laws, market volatility and an ever-increasing emphasis on wealth protection. The challenges ahead are complex, but they can be mitigated with foresight and careful planning. Here, we examine the top five issues that could impact HNWIs in 2025 and the strategies they should consider to stay ahead.

Reduction in the property tax exemption

One of the most important concerns for wealthy individuals is the potential decline in the exemption from federal estate taxes. In 2026, the exemption will drop from $13.6 million per individual to about $7 million, which could expose a larger portion of estates to the 40% federal estate tax. This change has profound implications for wealth transfer strategies, potentially affecting generations of family wealth.

Mitigation strategies:

• Speed ​​up estate transfers: With the 2026 deadline approaching, now is the time to consider using the current exemption. Techniques such as outright gifts to heirs or using the annual gift tax exemption ($18,000 for an individual or $36,000 for a couple in 2024) can allow meaningful transfers before the rules change.
• Trust structures: Create irrevocable trusts, including United Living Access Trusts (SLATs), to protect assets from future estate taxes while providing financial flexibility.
• Bypass Trusts and Estate Trusts: For married couples, these strategies can maximize the benefits of the current estate tax exemption while preserving assets for future generations.
• Valuation discounts and asset freezes: These techniques, which use valuation discounts for family-controlled entities or involve freezing asset values ​​at current levels, can be particularly useful in estate planning for HNWIs with appreciating assets. .

Tax policy uncertainty and higher rates

The political landscape in the US and globally suggests a future where income and capital gains taxes may rise, especially for high earners. Proposals have been floated to raise taxes on those earning over $1 million a year and to raise capital gains rates, which could significantly affect investment returns and overall wealth.

Mitigation strategies:

• Tax-efficient investing: Consider diversifying into tax-advantaged investments, such as municipal bonds, or shifting focus to sectors with favorable tax treatment, such as renewable energy or qualified opportunity zones.
• Income deferral and tax loss harvesting are effective strategies for managing taxable income. Additionally, charitable giving—especially through donor-advised funds or charitable remainder trusts—can reduce taxable income while supporting philanthropic goals.
• Optimizing capital gains: Realizing gains in lower tax years or spreading gains over multiple years can help soften the impact of potential rate hikes.

Asset protection amid economic volatility

Economic uncertainty, including the possibility of recessions, inflation or geopolitical instability, poses a direct threat to wealth preservation. HNWIs face increased risks, especially those with significant exposure to equity markets or illiquid assets.

Mitigation strategies:

• Diversification: A well-diversified portfolio across all asset classes—real estate, stocks, bonds, private equity, and alternative investments like art or collectibles—can help hedge against market fluctuations.
• Regular portfolio reviews: Continually reassess asset allocation and risk profiles, adjusting for macroeconomic trends and personal financial goals. For UHNWIs, implementing tactical asset allocation strategies can provide flexibility during periods of volatility.
• Comprehensive insurance solutions: Beyond standard coverage, HNWIs should consider umbrella insurance and specific policies to protect luxury assets such as yachts, private jets and art collections. This provides comprehensive coverage in the event of legal claims or loss of assets.

Complex Estate Planning and Philanthropy Objectives

In addition to tax concerns, HNWIs must address the complexities of transferring wealth to heirs, ensuring the continuity of family businesses and achieving philanthropic objectives. These goals must be balanced with the ever-changing regulatory environment, which can affect the administration of trusts and the distribution of family assets.

Mitigation strategies:

• Regularly review and update estate plans: Estate plans must be agile and responsive to changing tax laws. This includes ensuring trusts, wills and life insurance policies are in line with current financial goals and legal requirements.
• Trust-owned life insurance: Consider using life insurance within an irrevocable trust to provide liquidity for estate taxes or to balance inheritances among heirs who may have unequal shares in the family business.
• Multigenerational wealth strategies: Engage younger generations in the estate planning process early on, helping to create family governance structures that balance individual wishes with the broader goals of preserving family wealth.
• Philanthropic Vehicles: Charitable remainder trusts, family foundations and donor-advised funds can be used to fulfill philanthropic wishes while reducing estate tax liability.

Retirement planning and lifestyle maintenance

Many HNWIs struggle to balance lifestyle needs with investment risks, especially during retirement. As people live longer, maintaining wealth while ensuring it generates enough income to support the desired lifestyle can be a daunting challenge, especially when illiquid assets or significant capital tied up in businesses are involved.

Mitigation strategies:

• Comprehensive financial planning: A holistic approach to financial planning, which includes budgeting for current and future lifestyle needs, is essential. For business owners, this may include planning for liquidity events such as the sale of a business or succession of ownership.
• Income-focused portfolio management: The retirement portfolio should be designed to generate reliable income through a mix of stocks, bonds, real estate and alternative assets that match long-term income needs.
• Risk Management: Reducing exposure to high-risk investments as retirement approaches while maintaining growth opportunities is a delicate balancing act. Regular portfolio rebalancing to reflect changing risk tolerance is essential.

Looking Forward

Addressing these five core issues requires an integrated approach, combining financial acumen with careful estate and tax planning. The key to success lies in staying abreast of legislative developments, regularly reviewing financial and estate plans, and working closely with a team of specialist advisors.

HNWIs who proactively implement these strategies will be better positioned to navigate the uncertain future, protect their assets, and achieve long-term financial and legacy goals. In a world where the financial environment is in constant flux, adaptability and expert guidance will remain the cornerstone of wealth management in 2025 and beyond.