I received this message from one of my longtime clients this past week:
Jim, Ruth and I are anxious to set up a sustainable legacy account as part of our trust to benefit our grandkids. Cash they can access for specific stuff (missions, education, etc.). Based upon your experience, what is the best way to do that??— Richard and Ruth Taylor (names changed)
Here’s the reply I sent:
Dear Richard and Ruth,
I really love that you and Ruth are thinking about setting up something lasting for your grandkids and family.
There are several ways to do it, depending on how simple or structured you want things to be. Here’s a quick overview:
1️⃣ Annual Gifts: The easiest approach is to give each grandchild a set amount every year — up to $18,000 per person (or $36,000 per couple) without any gift tax. Some like to match what their grandkids save toward a goal — it helps them learn good habits early.
2️⃣ 529 Education Accounts: Great for education. The money grows tax-free and can be shifted between grandkids, though it can’t be used for missions or other needs.
3️⃣ Custodial Accounts (UTMA/UGMA): Managed by an adult until age 18 or 21. Easy to set up, but they gain full control at that age.
4️⃣ Family Legacy or “Family Bank”: A shared account the grandkids can draw from for approved purposes — education, missions, starting a business, and so on. It teaches stewardship and keeps the funds circulating within the family.
5️⃣ Trust with Guidelines: Add a section to your trust for education, missions, or buying a first home. Offers the most control and protection.
6️⃣ Kai-Zen: This is what I do in my legacy business. You’re buying a life insurance policy for a child or grandchild. You fund a portion over five years, and a bank funds it for ten. They end up with life, disability, and long-term care coverage; tax-free withdrawals; market-like growth with no downside risk; creditor protection; and a turnkey setup.
Example: A 46-year-old puts in $25,000 per year for 5 years. The bank contributes $265,370 over 10 years. Initial death benefit: $618,775. At age 65, they could withdraw $40,000 a year, and by age 95 they’d have taken out $1,240,000 — while still leaving a $598,422 death benefit.
Each option works — it depends on how much control you want and how hands-on you’d like to be.
Warmly, Jim
Their reply came almost immediately:
Jim, Thank you for these thoughtful suggestions. We have appreciated your input over the years. We’re both in good health (Ruth just turned 80 and I’m 86) and want to use whatever time we’re allotted to the fullest — just like you!
Legacy isn’t just about money — it’s about passing on purpose, love, and wisdom.
Jim Barlow, MS, The Alchemist of Leverage
OakTree Strategic Leverage -Smarter Leverage. Greater Outcomes.
A Legacy Business- sharing wisdom, helping others, staying sharp.
#KaiZen #LegacyPlanning #GenerationalWealth #FamilyBank #TaxFreeIncome #Leverage #AlchemistOfLeverage