How To Give Your Kids $250,000 of Tax-free, Penalty-free Cash at age 22!

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A good friend of mine came from a very wealthy family and I learned a lot about money from him.

But it was more than just money that I learned about.

It was about building generational wealth.

My friend’s grandpa was the perfect example of this.

The first thing his grandpa did for him when he was born, was buy him a life insurance policy (why does a newborn baby need life insurance?)

Well, they don’t.

But there must be a reason because a lot of wealthy people do it.

His grandpa bought him a very specific policy that was designed to accumulate cash and fly just under the IRS’ radar for taxation….(if I can give less money to the government, you have my attention)

So, his grandpa bought him an asset that would grow without taxes that he could access anytime, penalty-free, and tax-free.

Sounds intriguing, right?!

I was telling my friend about this yesterday, and she said, “I wish my parents had done that for me!”

Don’t we all?!

What was even more intriguing to me though, was not the fact that he had $250,000 of cash at age 22, but it was the fact that the policy was completely paid off!

The dividends on the policy had significantly outpaced the premiums.

So, he now OWNED this asset and never had to pay for it again (if he didn’t want to).

And it would just continue to grow, and grow, and grow.

This was literally a gift that kept on giving.

But there was another intriguing thing about the way this policy worked.

His grandpa told him “Even though this is paid off, and you don’t need to pay the premiums anymore, you should keep paying them.”

But, why?!

Well, if he continued to put $3000 per year into this policy, the cash would grow by more than $10,000.

This truly was the most valuable place he could save money.

He was essentially getting a guaranteed 300%+ return on his money every year, and those values continued to grow annually.

Now at the time, we were both starting our own financial planning business.

We didn’t make any money unless we found clients.

Well, he was in a very different spot financially than the rest of us in the business (and it became apparent pretty quickly).

This policy gave him the flexibility to build his business the right way at age 22 (without an ounce of desperation).

The first thing he did was use the cash value to buy a country club membership.

I know, I know, it seems extravagant and unnecessary, but hear me out.

This country club membership gave him access to a network that NOBODY our age had access to.

He would spend his days at the country club doing nothing but meeting and connecting with other wealthy and successful people.

Eventually, the club members started to wonder who this 22-year-old was and what he did for a living.

He was simply able to put himself in the right environment.

He told people at the club what he did and that he was a new financial planner who was just getting a business started in that world.

Lo and behold, in his first 6 months he met a guy (at the country club) who needed (ironically) a VERY large life insurance policy for estate planning reasons.

My friend ended up selling him the policy and making $100,000 in his first 6 months as a financial planner.

All because he had access to money that no other 22-year-old had access to.

This is a true testament to how wealthy and successful people typically become more and more wealthy and successful.

They are always prepared for opportunities.

While most 22-year-olds in the financial planning business barely had enough money to get through a couple of months without any revenue, he was buying country club memberships and meeting the types of people he needed to be successful.

Years later, he also used this policy to buy a house in the booming Denver market.

He didn’t need a loan from a bank either.

He had cash in his policy that he was able to use freely (and the policy continued to grow uninterrupted even as he took money out).

Years later, he sold that house for a $300,000 profit before his 30th birthday!

He could’ve never done that without the gift his grandpa had given him.

His grandpa basically gave him a huge, accessible, pile of money that he could use for anything!

It helped him in so many ways.

Seeing this with my own eyes, helped me in so many ways.

I realized that it isn’t that difficult to build wealth.

It simply takes an understanding of how to do it.

Imagine giving your kids the flexibility that my friend had at age 22.

He was literally able to do so many things that the average 22-year-old could not do, simply because he had this asset.

I think is one of the great secrets of wealthy people.

They buy assets (not liabilities) and put their kids and grandkids in a position to have a huge advantage in the world.

It’s really that simple.