Welcome back to the channel. Head of Product Alden Armstrong here. And today I'm really excited to share with you a really fun strategy. Now, when you start thinking about legacy, you start thinking about leaving something behind for the next generation or multiple generations. Oftentimes, the first thing that comes to your mind is life insurance. Obviously, you're watching our channel, so you know we believe in that. But secondarily, sometimes you can go down the rabbit hole of estate planning and trust work. And while a lot of that is very, very important. personally believe that everybody should have an estate plan because if you don't, the government has one for you. Wait, wait. Estate planning can be very complicated. And if we're trying to leave a benefit for maybe not my kids, but maybe my grandkids who aren't born yet or something more complicated than that, trying to mitigate estate taxes, it can get crazy. And so what I've come to find is that oftentimes the simplest approach, while it's not the mathematical best, can be a very big win to a lot of families because it's simple. you can act upon it very quickly and it's easy to understand when you start bringing in multiple different trust vehicles different ways to fund life insurance split dollar loan regime all these different things can get complicated so what i want to share with you today is something that i've been presenting that's really resonating with some of the clients i'm speaking with so i picked four what we're going to talk about today is building a legacy and how we're going to be turning in this example fifty thousand dollars into a lifetime of growth for generations Yes, plural, generations. So what we're going to dive into today is figuring out how to secure the financial future for your great grandkids. Now, many of you, such as myself, I don't have great grandkids. No way. Not ready for that yet. I got a three-year-old. And so this is not going to be applicable for everybody, but the strategy remains the same. What we're going to look at is combining an annuity with life insurance and doing it in such a way to give generation one. let's say grandma, she's 85 years old, in line here in benefiting generation four, which is going to be a 10-year-old male. The form is, there are two products. The first one is called an intergenerational joint single premium immediate annuity. Say that five times fast without stumbling over yourself. So SPIA is what I'm going to call it. This SPIA is a joint SPIA. And what that means is, well, grandma is going to be the annuitant. She's owning the contract. There's going to be a co-owner right that co-owner is a 10 year old kid now between you and me and a fence post we understand that a 10 year old is not going to be owning anything it's 10 he's not even at the age of making decisions much much less spending fifty thousand dollars so this is very much grandma's strategy so in this example we're going to take fifty thousand dollars put it into the single premium immediate annuity and because it's a joint annuity product it is going to pay out guaranteed for the life of both parties. So think about this. Grandma sets this up. Ten years later, she passes away. Does that 50 grand go anywhere? Do the payments stop? No, they don't stop because it's a joint product. And now we have the grandson at that point. He's going to continue to receive income for his entire life. So you can imagine if we run this out from a life expectancy perspective of a 10-year-old today with medical advancements and who knows what else, mid-90s. Maybe longer? We don't know. But what we do know is that we have a contractual guarantee from a very strong mutual insurance carrier, in this case, providing income for the entire life of the grandson. Now, what I'm going to walk through is what the mechanics actually look like. So in this example, we're taking $50,000, putting that into a single premium immediate annuity, and that then is going to spit out an income of $2,238.43. So in this example, Because it's an annuity, when we're working with in a single premium immediate annuity, we have an exclusion ratio. All that means is the exclusion ratio is the amount of money that's coming back out as income that's non-taxable. You can see the tax-free portion. You can see the taxable portion. So what I've done is I've said, okay, this FIA is paying $2,200 a year for the rest of the grandson's life as well as grandma's life. And I'm going to assume. that somebody has to pay taxes. Now, this is where it can get kind of interesting. Tax brackets, as you know, they're going to go like this. We don't know where you're going to be until you get there. So for this example, I'm using a 24% tax bracket. So assuming grandma is at that tax bracket, making retirement income of just over $100,000 in today's tax environment. And then in the future, I'm just going to keep that assumption of 24% because who knows what's going to happen. Now, when we look at this, $2,200 gets paid out. I'm going to assume that we're just going to take care of the tax right away. So we're going to take $371, throw that directly into a to the IRS, pay off the IRS and what's left. is about an almost $1,900 that we can use for planning. What I'm going to show you is how we can take that $1,900 a year, effectively tax-free for the rest of your life, or the grandson's life in this case, and put that into a vehicle where it's never gonna be taxed again, it's protected under state law, and then also we'll pay an income tax-free death benefit. One, two, three, what is it? Life insurance. As an overview, this is what we're looking at. So the very first year, when we set up this policy on a 10-year-old, putting in... $1,900 approximately. You can see that we start off with already over 10 times the original investment that grandma made in death benefit. So we have just over 500, close to $600,000 of death benefit on Nick. That's going to protect if the worst happens and Nick passes, well then death benefit comes to the family, the grandma's investment is made full. But when we think about this, nobody's anticipating our kids to die. It's just a fact. We don't want to think about that. So from a planning perspective, perhaps we mitigate the risk, but we plan for success, right? In this case, look at the growth trajectory in this policy. We're paying out for the entire life of Nick in this case, because that SPIA doesn't stop paying. It's going to keep going as long as he's alive. So every year we have premium payments of just around $1,900 going into this insurance product, buying permanent death benefit, and also driving. long-term cash value growth. So what we're going to do is look through what I'm calling the legacy in action, the key life milestones that Nick is going to go through. And so the first one is year one. Hey, amazing. We just did this investment and now we have some cash value to show for it. And then also a over $550,000 death benefit protecting Nick. Nick's going to continue to age year after year. That premium is still going to be paid every year by that SPIA, assuming net of tax, as you recall. And now the cash value has grown, putting in 19 per year. Over time, the cash value grows, and so does the death benefit. Hey, guys, I just want to interrupt real quick. If you're watching this and have an indexed universal life policy, a whole life policy, have any type of insurance policy in general, and you're like, I want to know if I'm on the right track. I want to know if this is set up properly. We at Better Wealth want to help you. We want to give you a free policy analysis and show you, are you on the right track? Is there some things that you potentially could be doing better? And so we have a link down below that you will have access to. We would encourage you if you have a policy and you want to see if you're on the right track, check that out. And if you're someone that's watching this and you're like, I want to talk to someone maybe setting up a policy for myself or I have questions, we would love to serve you. You can also see a link to have a call with someone on our team. Back to the episode. So by age 24, Nick, in this example, he's got about $31,000, almost $32,000 of available cash value. Now, for this individual, it wasn't a college funding play. This was a retirement income play and a family security and stabilizer for Nick and his family as he gets married, has kids into the future. And so around age 24, that $30,000, he would have access to it, right? Whether we set the policy up in a trust or ultimately transfer ownership to him personally, that money can be accessed by Nick to help start his family, buy a house, fund a wedding. And then over time, that money continues to grow and continues to compound. So fast forward, when I jump out here to year 45, this is where we're starting to think about and look at retirement. So somewhere between age 54 and age 47, Nick is likely going to be retiring. And so what did grandma's investment of $50,000 do? Well, one, all along the way, we've had a large degree of financial security. Coming into 50s to early 70s. we have cash value that can be used as a volatility buffer plug another video we did here with the tom wall on that the volatility buffer in essence is nobody is saying including myself is saying you should put all of your assets into life insurance all of your cash available cash and life insurance because it's not going to win in the grand scheme of things it's a phenomenal tool but it's a tool in a tool belt right there's more more things to the story so the volatility buffer if if Nick, in this instance, he's had a job, maybe it's a 401k, or he has other adjustments that he's going to be drawing off of for retirement. Unless he takes that retirement, it's the market, wherever his assets are sitting, has a bad year. And just to make math easy, let's say he's got a million dollars, and that million dollars loses 22% in that year. Well, if Nick then has to, after a loss of 22% in that year, take a draw of 100 grand, now that that million dollars, instead of being worth 900. taking a hundred thousand off the top now we're taking a hundred thousand at a much lower level and what that does is it compounds the loss it makes it that much harder for that portfolio to climb back up to where it was before. And so retirement income specialists like Tom Wall, like Wade Pfau, they're telling us the math shows if we can use life insurance to buffer that volatility, we're going to win. We're going to have a much better retirement income situation. And so when the market's down, Nick has that option to pull from this life insurance policy that his grandma set up for him at this point, almost 45 years ago. And that cash value continues to grow and compound and increase every year. But the other thing that cannot be overstated, guys, is the death benefit. I know a lot of people who watch the channel really focus on the cash value, what it can do for you, how you can use it today and in the future, and the tax favored nature of this policy. But it's still life insurance. And being a family man myself, having young kids, I feel very good about my situation if I were to pass or become disabled because I have insurance. to make sure my family's okay. If I pass, my wife has to find a sugar daddy. I don't believe in that kind of play. So I protect my family. I encourage you to do as well. So Nick has a death benefit that has been growing and compounding off of the initial investment of $50,000 year after year, going all the way out to life expectancy. So let's just say Nick passes around 94. Around this time, And we've amassed almost $2 million in cash value. That could also... be used for, like we said, retirement income or to help mitigate a long-term care need to pay for some of those expenses. And we also have over $2 million worth of death benefit. And so what we've done is over the course of four generations, so grandma, generation one, her kids, generation two, their kids, generation three, and now Nick, generation four. So that's four generations that grandma just impacted. So taking a step back, what did we really accomplish with this? Well, we've got grandma. 85 years old, have a little extra money that she doesn't feel like she needs and she wants to make an impact for her great grandkids. She's already doing some additional planning for her kids and her grandkids. This is specifically for great grandson Nick, right? So in this strategy, generation one grandma is doing planning for generation two and generation three and now leaving another aspect of planning for generation four. Generation four isn't isn't going to stay 10 years old. They're going to grow up. Maybe in their 20s, go to college, you need a girl, have kids. Those kids will have kids. Freaks me out to say this. My three-year-old is likely going to get married someday. So when we start thinking about the impact that this policy could have on people, right? It's not just Nick. It's Nick's kids. It's Nick's grandkids and it's Nick's great-grandkids. And so what we've done is effectively her planning today is impacting eight generations. Her own, her kids, her grandkids, her great-grandkids, their kids, their great-grandkids, their kids. Wow. There's a lot of people involved in this planning process. And I'll be the first to say, guys, planning does not exist in a vacuum. The illustrations that we look at with life insurance, especially from a mutual insurance company paying dividends, 100% guaranteed those will not happen. Why? Because dividends change year to year. Premiums change year to year. Taxes change year to year. But what this is showing is how a decision today can impact multiple generations over hundreds of years if it's done correctly. And this strategy allows grandma to know that what she's doing today is going to have a lasting generational impact. Another way to look at how annuities and life insurance can play nicely together. This is a strategy that we've used in the past using annuities to fund life insurance. There's about 15, 16 different ways to do that with different annuity products. At the end of the day, what we're looking for here, it's not to maximize the rate of return. It's to maximize certainty, right? Anybody with a couple of brain cells to rub together in the comments section, we'll be able to say, hey, what if I put money into S&T 500? That could, in theory, grow at 10% every year for the rest of your life. Yeah, yeah, you're right. It could absolutely do that. And it has done very well for the last 100 years if you look at averages. But what the data on an average doesn't show is what's happening in between. What variability are you taking on? What's the tax consequence? And so some people, some clients don't like to deal or want to. They want to plan around future variability. They want to know that what they're doing today is going to have a generational and lasting impact. Because of that, we use insurance, we use trusts, and we use annuities. Bundle them together in the right way. And all of a sudden, you've created certainty in a world of uncertainty. So I hope this was helpful for you guys. Have an amazing rest of your day. Feel free to like, comment, and subscribe. If you have any questions specifically for our team, click the link below. We'd love to meet you, talk with you, and figure out how best we can serve. I'll see you on the other side.
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