Sustainable Wealth Transfer – Episode 595

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, we’re going to be talking about sustainable wealth transfers. This can mean something different to all of our listeners, so Kim, will you lead us out with the definition, what that is for you and the audience, and then we’ll dive into it. Absolutely. So sustainable wealth transfers is about money being repeated generation to generation and also about values because it is not always what you leave to the next generation. It is what you leave in them. And so this is so fun of a space to talk about because so much of the wealth transfer space is focused on money, and we can talk about that for a minute, but I would like to also talk about what you leave in them because that’s something that absolutely

[00:57] every single person can do, no matter if when you die that will be the last penny of your generation or not. So on the monetary side, there is a well-known book out there by my friend Garrett Gunderson called The Rockefeller Method. There’s also the entire community at Laughlin Black, which is a LLC and estate planning environment. They talk about the Rockefeller Method, which is essentially just replacing the asset base every single generation with life insurance. It has a bunch of wills and trusts and LLCs associated with it, but the bottom line is you just, generation one buys life insurance, spends all their own wealth, lets the life insurance go to the next generation, which is super easy because the timeline

[01:49] is very specific. When death occurs, payment is made, and also it’s income tax free. That generation then uses those resources to build up their generation’s wealth. They purchase life insurance on their generation if the previous one hadn’t already, which is also part of the method, and it goes on to generation three, and on and on and on and on and on, and this is literally one of the things that the Rockefellers did, and they’re contrasted to families like the Vanderbilt’s as an example that did not do that and no longer have generational wealth. From a standpoint of monetary movement, timeliness, tax efficiency, those kinds of things, this centuries old product called Whole Life Insurance, because we want to

[02:41] make sure it’s guaranteed, so we don’t want any indexing or mutual fund connected to this space, is the product to buy for this generational wealth transfer, and then the strategies that are used, as I indicated, are the trusts and the LLC’s that facilitate some of that and include instructions with it so that that next generation knows what to do, which of course ideally they’ve been trained up along the way, and yet if not, it’s there in either actual trust documents or in additional documents with instructions so that now we can get into the conversation about what you’re leaving in them, because those instructions that I’m talking about are going to have that part too, but before I head there, let me just

[03:32] pause and see if there’s questions about that. No, I don’t think there’s questions. Most of the books that we’ll read by financial experts, or I should say the Google searches that are people doing, it’s about the technical pieces, like how do I set up this trust or how much should I have in this policy or in all, so and so forth, and that has its value, and that’s where an expert can come in and place some pieces, but you’re talking about something that’s much deeper, something that has more meaning to it, and something that is dealing with the stuff between our two ears, so that’s harder, so let’s take the next step in your thinking process. So under the category of it’s what you leave in them that is more important

[04:23] than what you leave to them is usually started with values, so this could be as simple as for a parent as soon as you’re able to start to communicate values to your children and at age-appropriate ways, and obviously as they get older, it’s more of a conversation where you’re instilling values in them, of course, but you’re also communicating them, and then you have literally a list of instructions, you could call it in addition to your trust, it could just be a yellow pad, it could be in the form of an email that lists out values that are important to you that you want to leave to that next generation, and if you can include stories with those values, then that drives the point home even further,

[05:17] so that’s parent to child. Well then, of course, as grandparents, we want to be doing So, grandparent to grandchild, we’re going to, again, be working with values, we’re going to be sharing stories of our life that demonstrate the implementation of those values, so maybe it’s work ethic, or maybe it’s timeliness, or maybe it’s a particular spiritual practice that is important to that grandparent to share with the grandchildren, again, age-appropriate ways, yet this has to happen over and over and over and over, you can’t just do this one time and expect the child or grandchild to pick up on it right away, now for those that haven’t been doing this, and now you have adult children in their 50s and 60s, and even older as our generations

[06:08] continue to march down the road, because it’s going to be very common now to have four and five generations all alive, that combination of sharing values with stories is just something that can continue to happen as it relates to conversations that are occurring, and what I find is that families need to be very, very purposeful about this, and it’s not a super easy thing to start if you haven’t been doing it all along, if you’ve been doing it all along, great, it’s easier, but if you have, for example, teenagers, and you’ve never done any of this kind of work, a really good opening line is, would you like to have more responsibility and independence in your life? Would you like to have more responsibility and independence

[07:04] in your life? Well, most teenagers are going to say, yeah, absolutely, great, then we’re going to install a trade. I will trade with you the ability to have more responsibility and independence in your life, and each family has to talk about what that looks like, in trade, for me sharing some very important things to me with you that you may not find important right now, but I think you might in time, and so this is the arena that you can start to have those conversations, and maybe it’s one dinner table conversation a month at the beginning, and maybe in time it improves to one dinner table conversation a week, and I have lots of different ideas and ways to bring these dinner table conversations up and very specific things that are money-related,

[07:58] other things that are more value-related, some of them are spiritual values, emotional values, some of them obviously material values, whereby that conversation can happen in a way that benefits both parties, and then you just need to extend it generation to generation to generation, so maybe now it’s the great-grandparents that are starting to talk with the grandchildren about it, or it’s that 80-year-old dad that hasn’t ever brought this up at all but now has a 60-year-old son, or maybe it’s a 100-year-old dad that has a 75-year-old son where he’s never had this type of conversation, and it can just, again, be offered in trade. Now, obviously, if your children are adults, you’re probably not going to use the responsibility and independence thing,

[08:49] but you might, it just depends. Nevertheless, there’s usually something that can be traded for, like, you know, you want to go play golf with me, well, I would love to do that, and during our time together, I would like to share some things that are important to me that may not be important to you but will be in the future. That’s a really good opening line to just start that role of conversing, which then can just continue and build as you go. Well, I really like that. To go full circle with this, with the way that technology is moving in the world, the technical aspects of setting up the trusts and the LLCs and allocating the amount of money, we’re going to have robots that do that. But robots can’t go through

[09:42] and they can’t create those milestone memories. They can’t create those trades between parent and child, grandparent and grandchild, or whatever that may be. Can’t happen. To take on the same heartbeat as we have with other episodes, what is the, call it tiny habit that you want to instill in our listeners for the sustainable wealth transfer? And I’m going to put one caveat, meaning if people are already doing this, then they can take that tiny habit and teach it to someone else. So that’s the framework I want to use with you. Absolutely. It’s purposeful conversations. It’s having the time and the space to have the conversations that are not going to occur if you don’t make them happen or create the space to have them happen.

[10:39] Because what’s going to happen instead is the sports or the weather or the people’s medical situations or whatever is going to get talked about. And that’s fine, but it’s not purposeful and it’s not going to get you exponential results. And most families want that. And so if they want exponential results, if they want different results, then it’s time to do something different. Thank you for listening to the Prosperity podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.