IFB Legacy

Creating Generational Wealth for Your Children With a Revocable Trust

You are newly married, just bought your first home, and you have a little one on the way. That is a lot of life changes coming at you quickly, and you want to do everything right.

One of the life decisions to consider is often not discussed, setting up some legacy fund for your new family addition. We all want what's best for our kids; we want them to have a better life than we had, as did our parents.

And one of the most important decisions is how or when to start setting aside for my child? There are a lot of choices to make:

  • Saving for college
  • Saving for the future
  • Setting aside money for a car or trips
  • Creating wealth to give my child a head start

Those are some of the choices I know I have considered for my daughter, and all the above choices are important, and it is good to plan for the future.

One of the discussions going around the political world is wealth inequality and people's inability to get ahead with their finances. Some of those struggles are the simple fact that we all start with nothing or very little to begin our adulthood journey. A few lucky ones might have wealthy parents or have families that set aside funds for college at an early age. After going to college, most of us start with a few bucks in our pocket, and away we go.

That is not meant to belittle anyone or their financial decisions; it attempts to help us all understand that we all have to start somewhere, and if we had a choice, we would do things differently.

What if the government, at the birth of every child, deposited $2,000 in an investment account for each child at birth, how differently would our lives go?

Instead of waiting for Uncle Sam to do this for us, why don't we take the bulls by the horn and start a legacy fund for our children?

There is a way for us to do this, which allows us to control the investments we choose, how the money is allocated, and when our child can receive their funds.

The vehicle that allows us to do this is a revocable living trust or revocable trust. The revocable trust allows us to choose what kind of accounts we want for our children, what kinds of investments we want to make, and allow us to control when our children can control their legacy funds.

There are many different vehicles out there, such as 529 plans, UTMA, or UGMA accounts, among the most common. All are great vehicles, but they have some limitations, such as the 529 plan only being available for school expenses. And the custodian or minor accounts allow the child to take control of the account at the age of 18 or 21, depending on the state.

Not all of these situations might be ideal for what you want for your child. Let's say you set up a 529 for school but want to set up funds to transfer to the child when they are 25? After they are finished with school and are going down a path for their life, those funds might allow them to start their own business, buy their first home, or start their snowball for their first child.

Bottom line, something like a legacy fund gives you and your kids the flexibility and freedom to live their best life, and that is what we all want.

The biggest advantage that a legacy fund gives our child is time. The passage of time, plus the power of compound interest, helps build up our funds.

The following is from Andy Shuler on the importance of compound interest and its impact.

Whenever I ask someone, "what is the biggest investing mistake you've ever made" the most common answer that I get, by far, is not starting earlier in life.

Does that resonate at all with you? I know it does with me, and I started investing at 26, which I consider relatively early in the grand scheme of things. Even young people that I talk to wish they had started earlier. People say this because they understand that time is one of the most important aspects of compound interest.

If you understand compound interest, you know that building massive wealth boils down to two things – time and investments.

Most people who understand compound interest are investors, and most people who do not understand it don't invest. It's as simple as that.

Unfortunately, we cannot go back in time and start investing for ourselves earlier in our lives. So, what do you do? If literally, everyone has the same regret of starting earlier, how can we do anything to fix it?

I cannot go back and change my situation, but what I can do is change my son's life. I am no different than any parent that wants the absolute best for my son, so why would I sit on the sidelines and wait for him to be 20, 30, 40, or even older before he began to invest? Why willingly do that to him?

That's why we invest for him.

Every month, on the day that he was born, we automatically transfer money into his account set aside for later on in his life.

Based on historical returns for the S&P 500 of 10% annually, investing $25/month from birth until age 25, and then just letting the money sit until our son is 65, he would have $1.48 MILLION!

If you up that amount to $50/month, the new total is $2.96 million! And at $100/month, you're looking at $5.9 million!

And remember, that's only investing for 25 years and then just letting the money sit there and keep compounding over and over again.

On the flip side, if our son were to start investing at age 26 like I did and invest to age 65, he would need to put in $12,100 each year to hit that same $5.9 million amount – except he invested $1,010/month while we only did $100!

So why do we invest for our son? The answer is simple.

We're learning from our mistakes to make his life better.

And we're not just making his life better – we're educating him about what we're doing in hopes that he will pay it forward to his children, and it will continue down the family tree.

We're creating generational wealth for the Shuler family forever. All by investing $100/month.

We are eating out a couple of fewer times each month, skipping that unnecessary piece of clothing. Clipping coupons when we get groceries. That's what it takes to get another $100/month.

Is that worth leaving a lasting legacy?

We certainly think so!


Your Instructor


Dave Ahern
Dave Ahern

As a banker, Dave saw how the basics of finance are not being taught to most people. Always learning, Dave loves showing how simple and effective investing can be.


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