Creating Generational Multiples of Money
People have different feelings about leaving an inheritance to their children or grandchildren. Some don’t care. Others do, for varying reasons. And still for others, the idea of creating generational wealth is compelling, especially when they understand the magnitude of effect and the possibilities of the how-to’s.
One way to leave an inheritance is to designate beneficiaries on your investment accounts. There are also various ways to transfer hard assets such as real estate or other physical property to those you love. One of the most compelling strategies, however, can also be among simplest, the most powerful leveraging of dollars, and even come with contractual guarantees and tax advantages.
I had a client that I’d worked with for several years before he passed on. Leaving a legacy to his family was important. At our reviews, we’d discuss how his assets would pass to his two adult children. Even though he had healthy investments, he chose to pay for $1.5 million of life insurance. The contracts were guaranteed to pay out upon his death and would be received income-tax free to his grown children as beneficiaries of the policies. When he did eventually pass on, the life insurance payout was immediate upon the processing of the death claim. The adult children were touched, a bit surprised and humbled by his generosity.
What is so compelling is that the premium that my client paid into his policies was nowhere near the $1.5 million that came out of the policies to his second-generation beneficiaries. Over the course of many meetings with his adult children (the second generation) and ultimately creating their wealth management plans, we discussed their legacy goals. Like their father, it is important to each of them to provide something similar for their children. We carried on his strategy and ;“carved out” a piece of their inheritances to purchase life insurance policies that fit their intentions. We plan to educate their children, and they may someday choose to follow the pattern for their children, taking this strategy four generations deep.
We marveled thinking of the original premium dollars that went into the first-generation policy and the leverage it provided to create generational multiples of money.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com www.SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
