6 Key Alternative Investments to Consider for Your Legacy Plan

Stocks and bonds are the usual go-tos for a legacy plan. But families with serious wealth often think bigger. From real estate to Picasso paintings, alternative investments can play a powerful role in the building of a lasting legacy.

Alternative investments such as private equity, real estate, hedge funds, fine art, collectibles, and commodities offer opportunities for growth just like standard investments. They may also help you make an impact, protect your wealth, and pass it on. These assets are no longer fringe investments but have become important considerations for families looking to create a long-term financial strategy.

Alternative Assets and Legacy Planning

Legacy planning is more about leaving an inheritance to the next generation; it’s about how you leave your wealth. For many high-net-worth families, that involves building a portfolio that reflects their values, long-term vision, and resilience across generations. Alternative assets cover all that ground.

In addition, “alternative investments can help reduce volatility, decrease market correlation, and support long-term overall growth, which usually aligns well with the multi-generational goals of wealth preservation,” according to Steve Branton, CFP and managing director at Wealthspire Advisors.

Like all investments, however, alternative assets also come with risks. They’re usually less regulated or less liquid (meaning they’re harder to exit). Those same characteristics also make them powerful and unique investments.

The more tailored your portfolio becomes, it increasingly reflects your values and interests rather than just returns. Before jumping in, work with a financial advisor who can align your financial profile with your long-term goals. Lastly, instill in your heirs why these investments matter and how they shape the larger family legacy.

Here are six alternative investments to consider.

Private Equity

Investing in private companies, whether they be start-ups or mature businesses, can potentially offer higher returns than public companies. Private equity (PE) is illiquid, but that can be a desirable feature for legacy-minded investors.

PE requires patience and access; investments require a large amount of capital, and returns take time due to the nature of private equity. Families interested in backing innovation, supporting local communities, or building influence can look to private equity to provide this impact in conjunction with gains.

Real Estate

Property has always been an area of wealth. More than just homes, real estate includes rental properties, commercial real estate, farmland, and vacation properties passed down through generations.

Real estate offers two unique monetary components: appreciation and rental income, and quite often, tax advantages. Real estate is tangible, generally appreciates, and provides families with a sense of place; think the Kennedys and Hyannis Port, the Vanderbilts and the Biltmore Estate, and the Hearsts’ Hearst Castle.

Hedge Funds

Hedge funds, investment vehicles for high-net-worth individuals, provide advanced investment strategies that can preserve and grow capital in all market conditions. They’re generally used to protect wealth through diversification and downside protection, and provide returns that beat the market through alpha strategies.

Like PE, hedge funds involve access and large amounts of capital investment, and due diligence is important to ensure hedge fund managers align with your family’s goals and risk tolerance.

Fine Art

Not only is art beautiful, but it is a store of value. Families interested in culture or history move towards acquiring art as a reflection of their interests and tastes. Art is also a reflection of wealth. Not everyone can acquire that Picasso or Monet.

With fine art and other assets, the timing of capital gains and estate tax is important. Branton says, “These assets may build up large unrealized gains. If not planned properly or sold at the wrong time, they can trigger significant capital gains or incur estate/gift taxes…In some cases, it may be best to hold private equity or fine art until death, when the basis can be stepped up and the asset can be sold with little to no capital gains.”

Commodities

Commodities, such as gold, oil, and wheat, are the foundations of the global economy and can add diversification to a legacy plan. While not fully immune to inflation and geopolitical uncertainty, certain commodities have historically held value over time.

They are tangible, globally traded, and can serve as a store of wealth in times of currency fluctuations or long-term economic shifts. As with any asset, timing and allocation matter.

Collectibles

People have interests, and some of these can be expensive. Wine, classic cars, and vintage watches might start as hobbies but can become valuable investments.

However, Branton says, “Be aware there could be valuation and liquidity challenges; illiquid assets like private equity and art can be hard to value and/or sell, which can complicate estate administration and ultimately delay any distributions.”

While they can be less liquid and sometimes harder to value, they add diversification to a portfolio, a sense of awe (more than a stock would), and a family legacy.

A watch passed down from grandparent to grandchild can hold a lot of meaning, oftentimes more than the monetary value. These are the types of items your family will cherish and discuss over the generations.

The Bottom Line

While traditional assets are essential and will always make up an investment portfolio, alternative assets offer families a way to build a legacy that’s more than just about returns. It’s about meaning, identity, and long-term impact.

From fine art to farmland, these investments can reflect a family’s values and passions, while also crafting stories and traditions that span generations.