Subscribe
Share
Share
Embed
Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your retirement questions. We're here to move past that oversimplified advice and dive into the nitty gritty. Now remember, this is just a show. It's not financial advice, so please do your due diligence. You got questions?
Mike:Text them to (913) 363-1234, and we can feature them on the show. David, what do we got today?
David:Hey, Mike. Are there other ways outside the five two nine plan to help my grandkids get ahead in life?
Mike:Yeah. This is this fun where it gets to creative thinking. So let's go down this kind of in a quicker way. You could just start gifting to them right now. And so instead of a $5.29 plan, which is somewhat restrictive, you could just start putting money into their account under the gift tax limit.
Mike:K? I don't remember what that is off the top of my head right now. It's usually around $16,000 or so, but you could just start giving them money, put into kind of a not a joint account, but like a account with custody. So as they're a minor, there's still some control over it. But once they're 18, you don't wanna make them do a trust fund, but, like, it's just extra slush money for them to use if they deem appropriate.
David:And is this like a checking account, savings, brokerage Yeah. Or all the above?
Mike:All of the above. Okay. Yep. And ask if you want a a checking savings account, just ask your banker. They'll know what this is talking about.
Mike:It's kind of a fun way just to start giving them some money to work with. Then you've got other things. So for example, let's look at life insurance.
David:Yeah. I have. I'm listening.
Mike:But what if you were able to fund a life insurance policy based on the grandchild's life, but you owned it. So you had control over it. And the the life insurance policy, you funded it over ten years, k, maybe fifteen or twenty years or so, and then you borrowed against the policy to help pay for their college. You borrowed against the policy to help pay for their technical school, or to help them start their first business, or whatever it might be. There's no restrictions to it.
Mike:It's whatever you want. You're borrowing against the policy, and you're spending money on things, so there's no gift tax issue. Okay? Then if you understand life insurance, and look at my Kipling article on how a next universal life insurance works, there could be positive arbitrage that slowly gets them their money back. But you funded also their term life insurance.
Mike:So it's a help to them when they get married, when they get a mortgage, and so on. They've got built in for the rest of their life an existing term life insurance component that has a cash value associated with it. And then when you pass or you want to pass on the life insurance to give them the control to it, whatever the cash value is associated with it, that's all you have to do for the gift tax side of it, and you don't even have to pay gift tax. It's just the amount. You just fill out form seven zero nine of the IRS code, and you can gift it to them, and you're just gifting part of the federal estate exemption.
Mike:Like, that's what I do Uh-huh. In my situation because it gives me more options. My kids get a term life insurance policy, which is kinda nice. They can borrow against it tax free, so it sets them up for multiple different phases of their life. It gives them their slush fund for emergencies, medical costs, helps them terminal illness, and so on.
Mike:It helps them get through college. There there's so many other mechanisms. I like that one.
David:Do you, as the grandparent, remain the owner of the policy? Yeah. You wanna remain control. Okay.
Mike:They have to ask for it. So there's no trust fund kid situation.
David:There's no automatic, hey. I'm 18, and it's now it's mine? Yep. Yep. Even if they're 26
Mike:You wanna maintain control over
David:it. Okay. Okay.
Mike:Yep. And then the last one is generational trusts, educational trusts. Those are very cool. We're not attorneys. Don't We really do that, but we do have a lot of clients that will go work with an attorney to set up those kind of gifting strategies.
David:Okay.
Mike:So things to think about to really fun conversation, but first remember, you gotta take care of yourself, then you can look to the charitable gifting to your kids, or to charities, and so on.
David:And so by taking care of yourself, you mean, hey, don't give more than you can so that you're in a bad situation yourself, just to help them. Is that right?
Mike:Yep. Like the airplane mask situation. Put the airplane mask on yourself first, the oxygen mask, then you can help other people. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast.
Mike:Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.