The Private Family Banking Legacy Strategy

The Private Family Banking Legacy Strategy

Creating a Generational Wealth System


What is a Private Family Bank?

If you don’t know what a Private Family Bank is, you need to read The Banker’s Secret to Permanent Family Wealth.

It will explain WHAT a Private Family Bank is, HOW it works, and WHY it is the best wealth accumulation and deployment platform for you and your family.

The purpose of this Private Family Banking Legacy Strategy article is to explore a specific application of Private Family Banking for people in their 60s and beyond, who have adult children.


Leaving them a bank instead of a death benefit

People in their 30s, 40s, and 50s generally look at Private Family Banking as a means of accumulating and growing cash for current self-financing needs and eventual retirement-income supplementation. It also provides a dependable quantity of money (death benefit) that will be left for their survivors – tax-free – when they pass away.

A single policy performs all these tasks well during these decades of life.

However, as one ages past mid-life, they get inexorably closer to dying. This reality changes the mathematics at life insurance companies, making a standard Private Family Banking policy less and less effective…for both the older adult and for those they will leave behind.

For this reason, we offer people in their 60s and beyond the Legacy Strategy as a means to enjoy the benefits of Private Family Banking based on the age of one or more of their adult children, and simultaneously extend these benefits down to additional generations.

In explaining the strategy, I’ll assume I’m talking to the person in their 60s or beyond.


The strategy

Instead of insuring your life with a Private Family Banking policy, you insure your adult child’s life. Assuming this puts the insured’s age back into the 30s, 40s, or 50s, both the cash value (bank) growth will be faster and the death benefit will be higher than if the same premium was paid into a policy on your life.

In this Legacy Strategy, the adult child applies for the policy. It will be in their name and will insure their life. The beneficiary(ies) can be whoever you agree on.

You will be the Payor who will make the premium payments (monthly, quarterly, semi-annually, or annually).

Once the policy is in effect, your adult child will transfer policy ownership to you. This requires only the submission of a simple form to the insurance company. This transfer will give you control of the policy, including the use of the cash value, which is the Private Family Bank.

You should pre-agree that they will transfer ownership back to you when the policy is in effect. The Legacy Strategy works best when all parties are voluntarily on board.

One option you should pre-agree on is whether you will change the beneficiary to yourself once the policy ownership is transferred. This is not uncommon, but it’s up to you and your child.


Now It’s Your Private Family Bank

After the ownership transfer, it becomes your banking policy insuring your adult child’s life, and it’s the beginning of a multi-generational financial system for your family.

On the Transfer of Ownership form, you will make your adult child Contingent Owner, which means that – when you eventually pass away – policy ownership will revert to them, so they will be both the owner and the insured. You could also choose to transfer ownership back to them anytime before you pass away.

During the time you are the policy owner, you pay the premiums and you control the cash value.

Once ownership reverts to your adult child, they will be responsible to continue premium payments and they will control the cash value (bank) and can designate beneficiaries and make other policy owner changes.

Premium payments may be optional by the time the policy reverts to the adult child. It depends on how many years premiums have been paid and how your adult child wants to use their Private Family Bank going forward.

Ask your Private Family Banking agent about converting the policy to “paid up.”


Generational Wealth

When your adult child eventually passes away, the death benefit will be paid.

If you have shown them the benefits of Private Family Banking, for you and them, they should want their children to enjoy these same advantages.

Your adult child can either designate their children (your grandchildren) as direct beneficiaries – having instructed them to use the tax-free death benefit money to start and grow Private Family Banks of their own – or they can have their death benefit paid into a trust structured to require that the money be used for Private Family Bank funding.

This strategy should result in larger and larger banking policies for each succeeding generation.


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