What’s the Recipe for Family Gifting Success?

It’s a special blend of love, prudence, and life insurance

By Ivy Woo John, MBA, GBA, Financial Confidence^® Senior Advisor

Having children and grandchildren you love is a blessing. Having the means to contribute to their ability to live up to their full potential is a privilege.

But, it’s a privilege that comes with significant responsibility.

To meet this responsibility, you need a proven recipe that gives them a financial advantage, protection from life’s harsher financial calamites, and empowers them to achieve their full potential.

And, like all recipes, if one ingredient is missing, or if there is too much of one and not enough of another, well, gifting can do more harm than good.

What’s love got to do with it?

The recipe for family gifting success has everything to do with love.

However, when you have the financial wherewithal to give a substantial gift, love alone is not enough. After all, without a gifting recipe that includes prudence, your children or grandchildren could become entitled and dependent on handouts.

Prudence dear

Prudence means being careful in providing for the future. Being careful means maintaining some control over how and when the money you gift is used. Along with your money, you have the opportunity to empower and inspire your children and grandchildren to take life full on.

That’s where purchasing a tax-advantaged, permanent life insurance policy on your child’s or grandchild’s life can play a vital role.

Life insurance for life

There are a number of significant advantages to leveraging the power of permanent life insurance in your gifting strategies.

Prudence is empowered because, as the initial policy owner, you have the opportunity to help the next generation understand the value of financial assets like life insurance. You can maintain control until you are confident they are financially responsible.

When they are ready, you can transfer the policy and its cash value to your child or grandchild without any income tax implications. And, if you’re gifting to grandchildren, you can transfer policy ownership to their parents who can then take over the role of passing on your values.

Overall, giving a permanent plan to your children or grandchildren could be the start of their financial literacy education; with this one strategy, they will understand the tax exempt nature of the policy and the power of compound savings.

Here’s how it works

The basic steps your wealth advisor will guide you through include:

• Purchase a tax-advantaged permanent life insurance policy on your child’s or grandchild’s life.
• Fund the policy with the assets you intend to give to them. More prudence: These may be assets you want them to use to pay for education, a first home, or starting a business.
• Name the insured child as a contingent policy owner. This makes it possible to transfer policy ownership upon the death of the parents or grandparents tax-free.
• Or, depending on circumstances, you may wish to transfer the policy to the child while you are alive so they can make use of the policy’s cash value. This can be done via a partial surrender, policy loan, or third-party collateral loan.
• Once your child or grandchild owns the policy, they can make the insurance policy part of their legacy plan by naming someone who is important to them as a new beneficiary.
• Finally, when the insured dies, the death benefit is paid to the beneficiary tax-free with no probate fees

One special ingredient

Because every family is unique, Financial Confidence Advisors creates precisely personalized plans for gifting and all other legacy creating strategies. Working with you, we ensure you enjoy as much confidence as possible knowing you’ve created the best possible recipe for family gifting success.

To learn more about how we can help you choose the best wealth preservation or wealth transfer strategies, contact me today.