Summary

The article discusses a strategy for parents to provide their children with substantial financial resources by purchasing a specific type of life insurance policy at birth, which accumulates cash value and can be accessed tax-free and penalty-free at age 22.

Abstract

The article outlines a method utilized by wealthy individuals to secure generational wealth through the purchase of a life insurance policy for a newborn. This policy is designed to accumulate cash without incurring taxes and can be accessed without penalties or taxes. The author illustrates this through the example of a friend who received such a policy from his grandfather. By age 22, the friend had $250,000 available to him, which was fully paid off and continued to grow due to dividends exceeding premiums. The policy provided the friend with financial flexibility, enabling him to invest in networking opportunities, such as a country club membership, which directly led to significant business success. It also allowed him to make substantial investments, like purchasing a home without a bank loan, and later selling it for a significant profit. The article emphasizes the importance of understanding wealth-building principles and the impact of having access to capital at a young age.

Opinions

The author admires the foresight of wealthy individuals who invest in life insurance policies for newborns to build generational wealth.
There is an underlying tone of financial savvy and strategic planning in the way the friend utilized the policy's cash value for networking and investment opportunities.
The author suggests that this method of wealth transfer is a "secret" of the wealthy, highlighting the value of owning assets over liabilities.
The article conveys that access to substantial capital at a young age can significantly enhance opportunities for success and financial stability.
The author believes that the policy's ability to outpace premiums with dividends is a key factor in its value as an asset.
The article implies that traditional banking loans are less desirable compared to using the cash value from a life insurance policy for investments.
The author promotes the idea that wealth building is straightforward when equipped with the right knowledge and tools, such as the life insurance policy described.

How To Give Your Kids $250,000 of Tax-free, Penalty-free Cash at age 22!

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A good friend of mine came from a very wealthy family and I learned a lot about money from him.

But it was more than just money that I learned about.

It was about building generational wealth.

My friend’s grandpa was the perfect example of this.

The first thing his grandpa did for him when he was born, was buy him a life insurance policy (why does a newborn baby need life insurance?)

Well, they don’t.

But there must be a reason because a lot of wealthy people do it.

His grandpa bought him a very specific policy that was designed to accumulate cash and fly just under the IRS’ radar for taxation….(if I can give less money to the government, you have my attention)

So, his grandpa bought him an asset that would grow without taxes that he could access anytime, penalty-free, and tax-free.

Sounds intriguing, right?!

I was telling my friend about this yesterday, and she said, “I wish my parents had done that for me!”

Don’t we all?!

What was even more intriguing to me though, was not the fact that he had $250,000 of cash at age 22, but it was the fact that the policy was completely paid off!

The dividends on the policy had significantly outpaced the premiums.

So, he now OWNED this asset and never had to pay for it again (if he didn’t want to).

And it would just continue to grow, and grow, and grow.

This was literally a gift that kept on giving.

But there was another intriguing thing about the way this policy worked.

His grandpa told him “Even though this is paid off, and you don’t need to pay the premiums anymore, you should keep paying them.”

But, why?!

Well, if he continued to put $3000 per year into this policy, the cash would grow by more than $10,000.

This truly was the most valuable place he could save money.

He was essentially getting a guaranteed 300%+ return on his money every year, and those values continued to grow annually.

Now at the time, we were both starting our own financial planning business.

We didn’t make any money unless we found clients.

Well, he was in a very different spot financially than the rest of us in the business (and it became apparent pretty quickly).

This policy gave him the flexibility to build his business the right way at age 22 (without an ounce of desperation).

The first thing he did was use the cash value to buy a country club membership.

I know, I know, it seems extravagant and unnecessary, but hear me out.

This country club membership gave him access to a network that NOBODY our age had access to.

He would spend his days at the country club doing nothing but meeting and connecting with other wealthy and successful people.

Eventually, the club members started to wonder who this 22-year-old was and what he did for a living.

He was simply able to put himself in the right environment.

He told people at the club what he did and that he was a new financial planner who was just getting a business started in that world.

Lo and behold, in his first 6 months he met a guy (at the country club) who needed (ironically) a VERY large life insurance policy for estate planning reasons.

My friend ended up selling him the policy and making $100,000 in his first 6 months as a financial planner.

All because he had access to money that no other 22-year-old had access to.

This is a true testament to how wealthy and successful people typically become more and more wealthy and successful.

They are always prepared for opportunities.

While most 22-year-olds in the financial planning business barely had enough money to get through a couple of months without any revenue, he was buying country club memberships and meeting the types of people he needed to be successful.

Years later, he also used this policy to buy a house in the booming Denver market.

He didn’t need a loan from a bank either.

He had cash in his policy that he was able to use freely (and the policy continued to grow uninterrupted even as he took money out).

Years later, he sold that house for a $300,000 profit before his 30th birthday!

He could’ve never done that without the gift his grandpa had given him.

His grandpa basically gave him a huge, accessible, pile of money that he could use for anything!

It helped him in so many ways.

Seeing this with my own eyes, helped me in so many ways.

I realized that it isn’t that difficult to build wealth.

It simply takes an understanding of how to do it.

Imagine giving your kids the flexibility that my friend had at age 22.

He was literally able to do so many things that the average 22-year-old could not do, simply because he had this asset.

I think is one of the great secrets of wealthy people.

They buy assets (not liabilities) and put their kids and grandkids in a position to have a huge advantage in the world.

It’s really that simple.

Like this blog? You’ll probably like this one too: 6 Proven Ways to Not Outlive Your Money in Retirement

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