• Stephen Gardner

Providing a leg up on life

Updated: Jul 5, 2019

Every year I pour over the data of my new and longtime clients to look for patterns. Who am I helping? What common denominators do I see? As I did this recently, I noticed a big recurring pattern that has an incredible future outcome. The majority of my clients are doctors and business owners. The next biggest subset I see are parents setting their children up for success. Whenever I'm a part of helping a client set their child up for success in the future, I get an instant injection of hope for our country's future.


Let's get real for a second. Life is expensive! And it is only going to become more expensive. I think back on what things cost 10 or 20 years ago and I am blown away. I look back on people's income 10 or 20 years ago and I'm blown even further away. The cost of living is rising exponentially while median income is not.


Recently I had lunch with a client of mine. He and his wife each own one of these specialized insurance contracts I recommend. We got talking about how much the average home costs when we were each married. At the time, the average home was around $175,000. It is now closer to $300,000. Yet, people's income where we live have not magically doubled.


The discussion led to how much will homes be by the time our children are in their mid 20's or early 30's. Then on to what will average income be at that time. The future doesn't seem as bright for each generation going forward.


So how do you give your kids or grandchildren a leg up in this world?


For many clients I've built a specially designed cash value insurance contract. I've done them as a gift from Grandma and Grandpa. I've done them as college planning. I've done them as a nest egg so kids can be in control of their car purchasing for the rest of their lives. I've done them for a couple's own retirement planning while setting up a legacy plan to leave money behind to children and grandchildren as a tax-free inheritance.


When properly understood and used, the plans I design can be used in a multitude of ways to improve a family's financial future. I'll share one such example so you can get a taste of how these plans can be used. This plan comes from a doctor client of mine wanting to save money for his daughter's college years and future financial freedom without giving up control to a bank, alternative investment, illiquid asset or Wall Street.


The doctor was referred to me by a client that owns multiple plans on himself and multiple plans on his children. This same family also did plans on each of the grandchildren. The new client I am working with was discussing how to plan for college and set his children up for financial success with my client at a barbecue. My client told this colleague he needed to investigate the plans he uses and the doctor bought him a copy of my Taming Wall Street book.


The new doctor has two children but for simplicity sake, I'm just going to show you the numbers on one of the children. On an 8 year old girl to be exact. Because of student loan debt still being paid off, this client is able to place $300 a month towards the program.


Before I show the numbers, I want to point out a few things. Number one, the client will have full control of the money and use of the money until he gives access to the child. If for some reason the child isn't mature enough to handle the money down the road or something comes up and the client needs the money towards his own situation, it is his money and he is the owner.



First I want to discuss how this program performs in the first 50 years of the child's life and then we will move on to the second 50 years of her life. As you can see by age 50, $151,200 has be contributed to the plan. The plan has grown to $531,475. This is an impressive amount considering only $300 a month was contributed.


Very few kids today will have $531,475 by age 50 let alone that amount completely tax-free.


By age 18 if the child decides to attend college, there is $40,168 that the mother and father can use over her 4 years to help supplement her college expenses. Once most parents see how this plan performs compared to a 529 College plan, they make the switch to the better option. By age 25 if she wanted to purchase a car and learn how to be her own source of financing for the rest of her life, she would have $86,617 she could access.


By age 30 if she was ready to purchase her first home, she could use some of the $133,733 towards a down payment. Whatever she decides to actually do, she will have the resources and option to do it or not. It won't be lack of money that holds her back.


No one and I mean NO ONE likes to discuss or think about their child dying, but in the event that something did happen, there is a tax-free death benefit. By age 40 this daughter may have a child or two of her own. The $1,499,089 of death benefit would give the client the money needed to care for the grandchildren should something unfortunate happen.


I've also seen situations where death benefit money was used to set up a scholarship in the child's name to help others achieve their education or as part of a business start-up fund to help loved ones start new venture.


Or if the child has decided not to go to college and the parents don't feel handing $500,000 off to an unprepared adult child would be a wise use of their money, then the client is still the owner of the money and contract. The parents may use that money as they wish, knowing at some point it will pass to the child.


These plans come with the ability to provide a real difference in a child's life or the ability to retain and use the money for ones self if needed and then hand it over upon your own death. They are flexible and versatile. Now let's look at the next 50 years.



One of the greatest advantages of this program is the annual growth. Imagine knowing your money will grow every single year. That means never missing a year of compounding interest. That means never losing account value or sliding backwards. This is how these plans can build such a large tax-free nest egg for a child with time on its side.


By age 70 the child never has to contribute another dime to the program (truthfully they can stop contributing sooner but the more you place, the more you will have). The plan has also accumulated $1,561,641 cash value with a $2,811,575 tax-free death benefit backing it up.


This is an incredible gift to a child and an even more incredible future inheritance thanks to you towards your grandchildren. Imagine blessing multiple generations of your family while also giving yourself a healthy nest egg to take from if you needed it. From this $1.5 million the child could take a tax-free stream of income for the rest of their life or they could allow all or a portion to continue to compound interest.


If the child did not end up needing the money because they were able to break out on their own and become self sufficient, then by age 90 the death benefit passed on is $4.1 million tax-free.


If people end up living longer thanks to modern medicine and the new death age is 120 or 150, at age 100 this plan has $4.6 million with $5.1 million in death benefit.


These plans are an excellent way to educate your children on money, compound interest, protecting against death and how to be their own source of finance capital. It's just as important to leave your child prepared to receive and wisely handle this money as it is to receive it at all.


Once people see these numbers and really understand how to use the money like a bank for recovering money on major purchases, you can see why this has become such a large portion of my clientele. A child is only as tall as the shoulders they stand upon. You may want to consider giving them a leg up and a strong foundation to build on at only pennies on the dollar.


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Stephen teaches about money, finance, getting out of debt and building tax free wealth.