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What qualifies someone as a high-net-worth individual?
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.
While cash is considered a qualifying asset, being an HNWI isn’t 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).
How HNWIs approach investing differently
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. “Both Wall Street and Main Street seem to be coming together to take more care in looking at what they own and what they’re invested in.”
However, there is a difference in how each group approaches investing.
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.
What really differentiates how HNWIs invest is what they’re able to invest in. Those who have at least $1 million in liquid assets qualify as “accredited investors” 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.
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, exchange-traded funds (ETFs), retirement accounts and certificates of deposit (CDs).
According to a 2025 study by the SEC, 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.
Tax strategies common for high-net-worth individuals
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:
- Tax loss harvesting: The tax loss harvesting strategy 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.
- Charitable giving: You can lower taxable income by deducting charitable contributions 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.
Tax laws change regularly and might vary by state, so it is important to speak with a tax attorney or financial advisor to implement a tax strategy that works best with your individual financial situation.
Estate and legacy planning for HNWIs
“The biggest concerns with estate planning are going to be taxes, where your assets end up and [who gets] control,” says Sturdivant. “Money is either going to someone you don’t want, it’s going to the state or it’s going to the people you want it to go to.”
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’s assets and wealth while minimizing tax liability.
High-net-worth individuals require strategic estate planning by a financial advisor since they are dealing with more complex needs, including:
- Organizing a greater number and more diverse mix of assets to pass along
- Ensuring business continuity
- Transferring wealth across multiple generations
- Avoiding higher taxation
- Keeping financial and other private information out of the public eye
- Contributing wealth to a charity or nonprofit that makes a difference in the lives of others and ensures a lasting legacy
Estate and legacy planning will likely include:
- Trusts: A family trust can protect your assets from creditors and help you pass on your wealth while avoiding probate, ensuring privacy.
- Strategic gifting: The annual gift tax exclusion and lifetime gift tax exemption allow you to distribute a certain amount of money and assets to others throughout your lifetime or at death and avoid the federal gift tax. In 2026, the annual exclusion is $19,000 per recipient. The lifetime exemption limit is $15 million for single filers or $30 million for married couples filing jointly.
- Charitable donations: Giving to charity allows you to make a meaningful contribution to an organization that aligns with your values.
- Business succession planning: If you own a business, you should determine who will take over the business once you are gone. Without a business succession plan, there could be disruption, loss of market position, low employee morale, legal problems or business failure.
FAQ
What asset level classifies someone as a high-net-worth individual?
High-net-worth individuals typically have assets between $1 million and $5 million. Those with assets over $5 million fall into one of two categories: very high net worth ($5 million to $30 million in liquid assets) and ultrahigh net worth ($30 million or more in liquid assets).
How do ultrahigh-net-worth individuals differ from standard HNWIs?
Ultrahigh-net-worth individuals have the highest amount of liquid assets among the wealth tiers—over $30 million—and are usually considered some of the wealthiest people in the world. These individuals require much more focused and complex services that might involve international and generational dealings as well as management of various income streams, investments and charitable giving. Ultrahigh-net-worth individuals don’t just donate to charities; they might run entire philanthropies of their own. Additionally, these individuals might have more than investments and some tangible assets. They likely have multiple homes and real estate investments as well as luxury items like rare jewelry, art and cars.
Do high-net-worth individuals need different financial advisors?
While a high-net-worth individual could use the same financial advisor as someone with a lower net worth, they might want to consider working with an expert who offers more holistic services and has specific credentials that match their needs. They might require a team of experts in various topics, like estate and legacy planning and tax strategy.
They’re also more likely to use a human advisor or hybrid plan over strict robo advising, since some services, like estate planning, require the human touch. The October 2025 Investor Brand Builder report by Escalent and Coagent Syndicated found that the greater the assets an individual had, the more likely they were to work with a human advisor. The report found that 36% of affluent investors with $100,000 to less than $500,000 in investable assets worked with a human advisor compared to 47% of investors with $500,000 to less than $2 million in assets and 51% of those with more than $2 million in investable assets.
Additionally, more investors who did use a robo advisor preferred a hybrid version, with 62% of investors with $500,000 to less than $2 million in investable assets ranking access to a human investment professional as very important.
What are common risks HNWIs should plan for?
High-net-worth individuals should be aware of and plan for tax and legal liabilities, cybersecurity threats, market fluctuations, estate issues and illiquidity—money tied up in assets that cannot be easily liquidated into cash.
How do HNWIs balance liquidity and long-term investments?
High-net-worth individuals have a mix of liquid and illiquid assets. They are defined by having at least $1 million in liquid assets, which might be cash, stocks, bonds, money market accounts and ETFs. However, they likely have illiquid assets as well, which are those that are hard to sell quickly and convert to cash and might lose or have lost value. These might include a business, real estate, private investments, vehicles, jewelry, art and other collectibles. By balancing their portfolios with a mix of liquid and illiquid investments, high-net-worth individuals have access to cash right away if needed, while also preserving their wealth through assets that provide more long-term growth.