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Welcome to The Keenan Roberts Advantage, where we discuss how families and business owners tactically grow and preserve wealth for generations to come. There's a right way and a wrong way to protect your business, grow wealth and transfer it. But most people only learn the hard way when it's too late. The advantage you get here is learning the strategies used by the wealthy, by top business owners, and by those who don't just make money, but know how to keep it. I'm here to break down these strategies in a way that's clear. actionable and most importantly something you can actually use.
I am not a CPA, attorney, or financial advisor. The information in this podcast is for educational and informational purposes only and should not be taken as legal, tax, or financial advice. Always do your own research and consult with a qualified professional before making any financial or legal decisions
How to Structure a Trust for Life Insurance the Right Way
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[00:00:00] Hello, friends and family. Welcome back to the Keenan Roberts Advantage, where we discuss how families and business owners tactically grow and preserve wealth for generations to come. This episode is brought to you by none other than asset smart, and today we're talking about life insurance, but not the way you think.
This episode isn't about me trying to sell you a life insurance policy, so let's get that straight. Okay. It's about how to use life insurance and trust together to preserve wealth and control, liquidity, and build a system, not just a payout.
And I'll show you exactly how it's done. Okay? The big misunderstanding, let's start there. Most people think that life insurance is about what your family gets when you die. Well, it kinda is, right? I mean, it'll pay off the house, cover the funeral, right? Final expense, maybe even give you a little bit of a cushion depending on what types of writers you've got, and sure, that's what most term policies are [00:01:00] used for.
But when you step into legacy planning. The game changes, the conversation becomes how do we actually create liquidity within the trust? How do we avoid forced sales of real estate or businesses? How do we fund succession without triggering taxes? Let me make that plain. How do we create access to wealth that is in the trust?
How do we. Avoid having to force the sale of your business just because you can't pay an estate tax, right? How do you pass down your legacy? How do you pass down what you've built without triggering taxes? If you wake up and really listen closely, you're gonna realize that this isn't just.
Death insurance. It's a [00:02:00] real strategy. So, lemme tell you a story. You've got a family, right, who had a multimillion dollar estate, businesses, real estate, and a really strong portfolio, but very little liquidity, the head honcho guy passed away in the family and the IRS showed up with a big bill.
Or, or, or Billy club. And they had assets like a ton, right? Multimillion dollar estate, but they have no cash, and that meant that they had to sell a part of the family's portfolio under pressure, under value, just to pay the taxes. That's right. That is what I call asset erosion by ignorance. Now compare that to another family.
They held a $5 million life insurance policy. Okay. And it was owned by a trust , who had [00:03:00] named the beneficiaries. Of that policy. Okay, so a couple things happen here and we'll talk about the different ways this can work. But a trust received the payout and that was used to do whatever it needed to do.
Pay off debts, whatever, right? Maybe you wanna buy out a sibling 'cause they don't wanna have anything to do with the business, or maybe you want to invest in the next generation. Just have a lump sum of cash available as a death benefit or trust. Own the policy. And that will help to not contribute to the overall estate , that was taxed in the first place.
So we'll talk about those options. But nonetheless, there was no court. There was no chaos, just cash. Okay. So how do you structure that?
Let's talk about a structure. Okay. There's two strategic ways life insurance works with the trust.
For one, the trust owns the policy, so the trust pays the premiums and assets state outside of your personal estate. Okay? That's a great [00:04:00] option. And then option number two, The trust is named as the beneficiary. So in some cases you may not be able to make the trust the owner of the policy, but you can still, if you have a revocable beneficiary you can change that so that a trust is the beneficiary and you would keep the ownership.
And of course, that's gonna trigger some estate taxes. I've said in some of my eBooks, and maybe even, I don't know if I mentioned on the podcast yet, but of course, ownership is always gonna be. Tied to taxes. So that's why there's gonna be some estate tax exposure.
But the trust, if it's a beneficiary, would receive the payout. Okay? And of course, the payout is now under the trust rules, depending on how it is set up. But in both setups, the money doesn't go directly to an individual. It goes to a trust according to the trust terms that are set. And that money can now serve a purpose, a mission, right? Let's talk about some numbers. [00:05:00] Here's a stat for you. You have mentioned it several times already. By 2026, the estate tax exemption drops from 13.9, basically 14 million to about 7 million per person.
That means millions of families who were under the radar will now face estate taxes. And what gets counted in your estate? We know it's your business, your assets, right? Your real estate, of course, and your life insurance. Your life insurance, if it's not in a trust, contributes to your personal estate.
I was talking to one of the top carriers, the top insurance carriers, who had no idea that life insurance as an asset contributes to an individual's personal estate. I found that quite surprising. But hey, you know. That's why I'm here to share some of these things with you so that you aren't caught by [00:06:00] surprise.
I just thought that was interesting 'cause they're a really big carrier anyway. Translation, that policy that's supposed to protect your family could end up costing them. But when it's inside a trust structure correctly, none of that is exposed because it's not your personal. You don't own the trust.
You're not the grand tour of the trust. It has nothing to do with you as an individual. You see, it's about the direction of where the money goes, not necessarily always the dollar amount. Now, if you can listen closely, this is the part that most people miss. A trust without liquidity is fragile. Liquidity without direction.
Is dangerous, but Liquidity with structure. That's how legacies are built. [00:07:00] Have you seen what happens when a kid gets a lump sum of an entire state at the age of 21? They're probably gonna destroy it, but. When that money comes into a trust, whether you have guidance conditions, it becomes fuel, not fire.
It becomes something that is set up for how you wish the estate should run even after you're gone. You're controlling your legacy from the grave because of what you planned for.
So what do we do with this? Well, for one, highly encourage you if you are listening to this to review your life insurance policies. Who owns it? Who's the beneficiary? I'll let you know. I bet you own it. I, I bet your kids, if you have any, or maybe your relative, [00:08:00] someone you love, are listed as beneficiaries.
Ask yourself this question. If I die tomorrow, will my family have to sell something to survive? Look, I'm trying to help you get proactive. Don't wait for the problem to hit you. Build the structure. Now, this is tactical information, right?
The concept is a strategy, but what are you gonna do tactically to get it done in the short term? Understand that a trust gives you control. Life insurance gives you liquidity. Together they give your family a better future. Serious question. Are you ready to take control of your time, your income, and your future? If you've ever wanted to own your own business, write your own schedule, and earn while you learn the ultimate secrets of the wealthy, this is your choice. I work with a team of experts [00:09:00] who help business minded people, just like you, build something real.
If you're tired of waiting for opportunities and you're ready to create your own, let's talk. Send me a text message. of the word Mentee, to 50750asset. That's 5075027738 to get connected and start building your advantage today. Again, that's text Mentee to 50750asset now and we'll get you started on a real path to financial control.
Now, I would love to wrap this up, but I wanna talk to you all about something that I get questions on quite frequently whenever I'm talking about life insurance and trust together.
And they say, Hey, what about this irrevocable life Insurance Trust? And I'm gonna tell you the irrevocable life insurance trust lie that no one talks about. So let's get something straight. An irrevocable life insurance trust. It is a powerful tool. I'm not gonna knock that. [00:10:00] Right. But to me it's just a title because an irrevocable trust when structured correctly, call it what you want, an irrevocable Life Insurance Trust is a powerful tool, but the way it's traditionally structured, it's not set up for your best interest if you're the one that's building the wealth. Okay? How? If you walk into a standard estate planning office and say, Hey, Mr. Guy, Mr. Attorney. I want to use a trust to protect my life insurance.
And they'll say, great, we'll set you up with an irrevocable life insurance trust. They probably won't do that, but, because they're not gonna give you an irrevocable trust. But if maybe, if they're good, if they're, if they're actually good, they'll offer something like this, right? But here's the problem.
You are the grand tour. Your kids are the beneficiaries, and something else, maybe even a third party is the trustee. What does that mean for you? If [00:11:00] you've been listening to this podcast long enough, if you've been reading my books, you'll understand that you would lose all the control. Why? Because by design.
When you're the grand tour of an irrevocable trust, you walk away. That's the law. That's what the IRS wants, that's what conventional planners recommend. But that's not what the wealthy do. That's not what the billionaires do. That's not what the folks that are actually growing their wealth generation after generation, they don't do that.
Why would I spend decades building wealth and then hand it to a structure that I don't control exactly When structured the conventional way, you can't change beneficiaries. You can't manage how premiums are paid. You can't decide how the death benefit is used. You can't even access the trust strategy as life changes because you walked away.
You've locked yourself out of your own legacy [00:12:00] and you gave it up to someone else to control it. So I think the obvious thing to do is not be the grantor, be the trustee. Because as a trustee now you control what happens. Let someone else be the grantor and let them walk away. Right. If you step in as a trustee.
The one who actually makes the decisions. Now you control when and how premiums are paid, what happens with the cash value, how and when the distributions are made to the beneficiaries, and how the death benefit fuels your family's structure, your family's legacy, your family's future. And that's what I mean when I say control without ownership.
All right, so flipping the script here, technically the grand tour cannot be the trustee in a standard irrevocable life insurance trust. That's because it's written that way.
But if you structure the flow of ownership, [00:13:00] you can keep control without getting kicked out of your own plan. And this is where private trust strategies go far beyond an estate plan. An irrevocable life insurance trust without you in control is a loaded gun in someone else's hands.
You, we, everyone needs to think bigger than just tax savings. Okay. The goal isn't just to pass wealth. The goal is to protect it, to position it, and to preserve control within the family. 'cause that's how you pass it down. That's, that's how you do it across generations. And the real win is when you can still lead the mission.
Even if your name isn't on the assets, that's the key. That's the secret sauce that I've been talking about for every episode. So that's it for today's episode. If this hits home, I'm gonna ask that. If you're [00:14:00] listening to this, do me a favor.
While this podcast is still available for everyone to listen to. Because it'll be limited. I'm gonna turn this to a private podcast. I decided share this episode with one other person who's building something worth protecting. If you're ready to explore how this strategy might work. Continue to engage in this podcast. Tune in. Until next time, keep building, keep protecting. You're listening to the Keenan Roberts Advantage and I will see you on the next episode.