E29: How to Leave a Better Legacy

Nate: In this episode, we will discuss how to develop a legacy mentality, and some practical tips that you can implement that will help you leave a large and generational legacy for your family. She’s Holly, and she helps people find financial freedom.

Holly: He’s Nate. He makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: All right, Holly. So this is a topic of course that’s dear to our heart because we deal mainly in the world of life insurance, and we’ve seen people leave legacies. We’ve seen people inherit money, and help with that. So, today we’re going to talk about some practical steps, but as well as some philosophical, I guess you could say, steps. How to leave a legacy that will last, and that means a lot to you. So, Holly, what are some things mentally that, when it comes to leaving a legacy that people can get kind of caught up with. Either things for the benefit of the legacy, or things that will push against it.

Holly: One of the first things mentally is a dollar amount. Like how much money do I have to leave my kids? Or how much money am I going to leave them? Like we have this magic number. Instead of taking a step back and realizing it’s not a dollar amount. It’s that wisdom that you gained or learned in your lifetime that we are not passing down to a generation. And I think we live in a society where we either have, positive or negative, but I like to say a poverty mentality of I can’t leave my family much. So you skimp and you save you’re entire life just to leave a little bit. Or, the giving mentality of let’s give back and continue to give back. And even in giving, that can be a blessing and an example to your kids.

So, I think there’s two mentalities of we scrimp and we save so that we don’t really live life at all. And we pass that mentality down to our kids where we actually live life with a giving attitude, and an attitude of blessing one another. And it’s as simple as, for me, it’s as simple as when you’re at a restaurant, and your food comes to you, and it’s not cooked correctly. And you immediately take it out on the server that brought the food, when in reality it’s probably the cook. Or something maybe happened in between, but really still recognizing that that server is in the service industry, and just because your meal wasn’t absolutely perfect, doesn’t mean you leave no tip. Or just a couple dollars of tip because you feel like they didn’t earn it. Because they are in a service industry, and so for me it’s more of that giving mentality.

Recognizing that we put mistakes on other people when often there not their mistakes, versus that scrape and save mentality of, you know what? We all have to drink water at dinner, and we’re only leaving the bare minimum 10% no matter how the service was. And we’re only going to buy two meals because then we’re just going to split the meals between everybody else so we spend the bare minimum to pass on more to our family.

Nate: That’s certainly [inaudible 00:03:30] true. And biblically, it says in Proverbs that a good man, a righteous man, leaves an inheritance for his children’s children. And I know some people have said, “I don’t really want to leave my kids anything.” Which, I think is just as you kind of said, is the wrong mentality. A lot of times that’s a scarcity mentality, where they think that money will corrupt the kids, maybe? And certainly we’ve seen plenty of examples where that’s happened in history, but that’s kind of what Holly was saying, of teaching by example. Not just leaving them a legacy. I think it’s very important to leave a financial legacy, but also a legacy of wisdom where they maybe have even taken part in building their inheritance maybe to a certain extent. Or, in other words, instead of hiding how much money you have … I know plenty of people who had no idea that their parents had any money because they always looked like they were broke. And then suddenly they get this big check, and they don’t, their parents were the ones that actually built that, but they didn’t actually tell their kids anything about how it was built.

Unfortunately for us, and Holly you and I know this, most people get a lot of their financial education from their parents. They adopt it from them a lot of the time. For good or for bad. And we ought to try to leave as much good with them along with the money, and as Holly said, instead of having this scarcity mindset … I know a lot of people don’t actually end up leaving an inheritance, or they don’t think they ever will because they think they’re going to have to consume all their money just to make it themselves.

And that’s one thing that I would really strongly suggest you do, is see your priorities. Is it a very high priority? Are you really legacy … Do you have a legacy mindset and mentality? If so, make that your priority instead of more of a self-centered I want to use it all for me, and not leave anything. Which, I guess it’s okay to have that mindset. It’s your money, but I would strongly encourage people to try to think, okay. I want to be able to leave something to my kids and my grandkids. I want to change the family tree. I didn’t get anything, and I don’t want my kids to be in that same position.

I want generations after me to be blessed by me. And now, it’s like how are we going to make that happen? And with that is more of an abundance mindset, and I tell you, if you start thinking about it that way, it will come to pass.

Holly: So I think one of the keys is that you need to look at the wisdom, and how wisdom of money is actually passed down from generation to generation. And one of the two families to look at and really to evaluate, is the Rothschilds and the Vanderbilts. Back in the early 1900s, the Rothschilds had not nearly the wealth that the Vanderbilt family had. Yet today, there’s very few millionaires in the Vanderbilt family, and there’s a lot of millionaires in the Rothschild family. And even a few billionaires, all due to the fact of the wisdom that the Rothschild family passed down from generation to generation about how many worked. They didn’t just pass down the wealth. They actually taught, and explained how money worked so that future generations did not miss out on the opportunity of not just the wealth, but creating wealth. Where the Vanderbilt passed down the wealth, but they didn’t pass down the wisdom.

And I think back in my day when I grew up, around the kitchen table we had these great family conversations. But oftentimes we’re not having those conversations around the table because families are so busy today. But where we used to never talk about sex at the table, it’s almost more prevalent, but we don’t actually talk about money very often at the table. It’s like that taboo topic to talk about money, or how it works, or your wealth, or your family’s wealth. And I think we shouldn’t be afraid to actually enter into those discussions, but it comes with the wisdom and understanding of how money works. And that most of us have learned how money works from our parents, and they learned it from their parents’ parents, instead of actually taking the time to educate ourselves on how money actually works. Because if we don’t change something in the cycle, what we have been taught, which really is only from our parents, will not change our financial future, and it won’t be financial wisdom that you can pass down to generations to come.

What do you think, Nate?

Nate: Yeah, I mean I think that practically speaking … We’re going to get into some practical tips on how to actually leave the legacy, and things to kind of safeguard that in just a second, but I’m thinking more like practical tips on leaving wisdom. As Holly said, you’ve got to actually talk to your kids about money, and then you also have to lead by example. If you want your kids to actually save money when they get older, and not spend 100% of what they make, then you’ve got to show them that you actually save money. And they have to grow … hopeful they grow up seeing you not spend every dollar you make. Maybe not thinking the most important thing is to have more stuff, or whatever it is.

Maybe also, if you’re big into making certain investments in real estate or wherever it is, that you share with them why you’re doing what you’re doing, and get them excited about wealth building, and teach them about how to do that. Or, in the banking concept that we teach, actually sharing with them how they can use mom and dad’s policies to finance cars and repay it, and get all the money back and make a profit.

So, there’s practical things by including your children in there can help, and whenever you actually leave them a large monetary legacy, that they actually know what to do with it and won’t squander it, so you can really create what we would call generational wealth, passing further than just three generations.

Holly: We’re going to take a break, and when we come back, we’re going to share practical steps and things you can do in your own life, and exemplify that to your kids.

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Well, welcome back to Dollars and Nonsense. I think when we left off we were going to share about some practical tips, and how we can leave a legacy to our family. I think one of the very first tips that Nate hit upon is the fact of you have got to determine that you’re not spending every dollar you make in order for your kids to understand that there has to be a saving element in there, and that you’re living within your means, and you’re also putting some money aside.

Typically, we hear save 10% of what you make, and I think for each person it’s up to you. I can say that if you’re only saving 10% of everything you make, you’re going to eventually run out of money. Would you agree, Nate?

Nate: That was maybe in the golden days when people were making, they thought they were going to make these huge returns in the stock market and these mutual funds, and people are not experiencing that, but they still have this 10% rule. I don’t know if that’s going to work in the future. I really don’t.

Holly: I think one of the other things is that we talk about, and that I learned from my dad, is that when I get paid … I am self-employed, but even when I was a W2 employee, that often there’s two types of people. There’s the spender, and the saver. And there’s the spender who immediately when they get that paycheck, all the money is gone to pay the bills, and then at the end of the month they’re just living on the little bit they have left.

And then there’s the person who’s the saver, but they actually in my idea, they actually pay themselves. So they take part of that money that they earned, and they pay themselves. That’s what I call the saving portion. And then, they go out and they pay the bills. Because often what we end up doing is, we keep working, and working, and we never pay ourselves for that money. And we’re really a slave because we do all the work, and everybody else gets all the money.

Nate: Absolutely. And one of the most practical tips that Holly and I can probably give for people who want to leave a legacy, is through that banking concept. We teach them that banking and using permanent life insurance as a bank, not only for you personally, but Holly, as we know, every time you open a policy, you are guaranteed from day one to be able to leave a legacy.

Holly: Absolutely.

Nate: Guaranteed from day one. There’s very few other things that essentially as soon as you get into something, you know beyond a shadow of a doubt that you will be able to leave your kids something. Hopefully, quite a bit, because the death benefit on a policy is always greater than the cash value. So even if you used all the cash value for yourself, taking passive income out or whatever it is, you’re still going to leave your kids something just automatically, and it’s very comforting to know. And it brings certainty to it instead of worrying about the stock market, or real estate prices, or finding renters, or all these things, it’s pretty hassle free. And it builds certainty. As soon as you buy the policy, you know that you have the ability to leave your children, right then and there, contracted with the insurance company. You know what it’s going to be, and it’s a pretty powerful system just to be able to know that.

Holly: And I think, Nate, when I talk about paying yourself first, I’m going to use myself as an example. My very first policy that my husband and I purchased was actually 11 years ago, so it’s 11 years old. And at the time, we could afford $300 dollars a month. To be honest with you, that was our 10%. We paid that in monthly, and what we did is we viewed that as it going into our savings. I viewed my premium payment as actually as paying ourselves, and that was our deposit, and that we were going to then be able to leave a legacy for our kids even if that’s all we could afford for the rest of our lives.

And today, that $300 dollars seems small, but it was where we could start at, and the legacy that we’re already going to leave far exceeds any amount of money we’ve put in there, plus the cash value that just grows exponentially because it is 11 years old. But it was a number we could start with, and that was our way of paying ourselves, and then taking that money and using it to recapture debts, which is something we teach people how to do through our business, is really taking third party debt and paying yourself back. But really, that was paying yourself first. And I think that’s the very first step, is all of us hopefully are saving some money, and just putting that money in a policy is the safest place in my opinion, because it gives you death benefit, but it gives you cash and a guaranteed growth rate.

Nate: It’s a great place to be able to utilize money instead of just letting it sit there. To keep it in motion, and finance other things. Taking over debt, buying assets, whatever it is, but … So I think that one of the first steps, and the quickest thing is you’re getting that mentality that you really, you say Nate, I do want to leave something to my kids.

Buying a policy is an awesome thing to do in order to guarantee that. To guarantee that something will transfer. Also, we talk about the philosophical side earlier, but the question is, we have found, Holly, another step that is actually possible to pretty much guarantee that the legacy will continue regardless of whether or not your children really do a good job. That it can actually continue on down the line based on what you do. My thoughts are, instead of just buying policies on you, and let’s say your spouse, why not start buying policies on your children? And on your grandchildren when you have grandchildren? And maybe even your great-grandchildren at some point. And to me, by doing this, what we’ll do is you’ll actually have, when you pass away, a death benefit goes to your children and they could squander it all, but since you already bought policies on your children, that means the grandchildren are guaranteed to receive money when the children die. And then since you bought policies on the grandchildren, then whenever your grandchildren die, your great-grandchildren are guaranteed to receive.

In other words, you can in your life pretty much position yourself to be able to create a lasting generational legacy by what you’ve done, regardless of what the initial legacy for your children is going to be. They could squander it all and still be able to leave money by what you’ve done, because you own the policies, and you can put them in a trust, and to dictate how they’re going to be working.

We’ve actually seen some people actually gift money to grandkids to buy policies on their parents so that whenever their parents pass away … I know one client who was just worried that his children … so that would be the parents of his grandchildren, were not going to be good stewards of it, and he wanted to make sure that something was left for the grandkids. And so what he did is he actually went out and started polices, or gifted money to the grandchildren to start policies on the parents, completely bypassing his children, and guaranteeing that when his children died, the grandkids would get something. It was a very unique process that he was able to develop.

Holly: So what Nate was sharing was really important, that grandparents actually can leave a legacy just by gifting their grandkids money and buying policies on their parents. Another ideal way of doing and passing wealth if you don’t want to do it necessarily to your kids, is by actually gifting even the kids money that they can then use to buy a policy on their own parents. So insuring what you would call my parents, and by gifting us money, that specifically goes to buy a policy. Because chances are that the parents or grandparents are going to graduate from this earth first, and then you have a windfall. And that windfall then can actually pass to the grandchildren in order to buy policies on their parents. So there’s a lot of meat in there’s in regards to how do we pass generational wealth, but really one of the keys is the grandparents being able to actually gift money, or purchase policies on the grandchildren, or give money to the grandchildren to purchase policies on the parents.

Nate: Yeah. And what you were saying, Holly, by the way, gifting money to your kids to buy policies on you, that’s a great thing to do because as you know, especially if you’re dealing with estate tax issues. If you have an estate over 10 million, being able to gift money to have a policy for your children to buy a policy on you, can get money out of your estate and then that death benefit would pass not as a part of your estate. It actually would pass because the … just straight to them as beneficiaries because they actually owned it.

So that’s actually a great idea to try to avoid some potential estate taxes on some of that money. You know, being able to gift your children, and even your grandchildren, money to buy policies. That way you can … They’ll be the owners. You don’t own the asset, and so it’s not going to be calculated as part of your estate when you die. So I think that’s a great point that we didn’t even really think about before the podcast, but it think that was a great point to bring up.

Holly: Yeah. And we just want to really summarize what we’re saying is there’s kind of three steps. Maybe more, but first of all is we have to educate ourselves on how money works. The wisdom of that. And you need to do your own research, or find somebody who is willing to educate you. But there are plenty of stuff out there that’s good and bad, but the first thing is just how does money work? And if you want to look at a family that’s done a really good job, you need to look at the Rothschilds, of how they passed on the wisdom of that. Second point being is what is our mentality? Do we have a what I call a poverty mentality, or scraping by mentality? Or that giving mentality because we’ve learned how money works, and we live within our means? And then third is, how do we pass on this money?

Really, the safest in my viewpoint, and the best way to do it is through a mutually-funded, dividend- paying, whole-life insurance, and that you either are gifting that money to the kids to buy it on the parents, or gifting the money to the grandkids and letting the grandkids actually purchase on their parents. And that way you save just with estate taxes, but also in the gifting of that money.

Nate, what do you want to add?

Nate: Practically speaking, spend time with your kids educating them on how money works, and setting them up for success. And make it a goal of yours to be able to leave something. I just encourage you to do that. I think it will benefit your whole family and you emotionally, knowing that it’s not … when it’s all about me, all about me, I can’t wait to retire. I can’t wait to spend all of my money. I tell you that it doesn’t really work as well as you might want it to. It kind of drives … could drive you insane. But be giving, as Holly said. Think practically on what you can do to help your kids be a part of that, but also think of ways to utilize these policies that we encourage you to get on not only yourself, but your kids and grandkids, and outside the box ways to fund those to give the most benefit and the most secure way to pass on your legacy.

Holly: And I think too, what Nate talked about really early on in the program, being an example to your kids. Living within your means, and showing them that, and being able to actually show them how to save is key to part of that wisdom and that information in the passing on. You have to lead by example, and it starts with you. So make a change, and make a difference.This has been Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: To get free resources and transcripts on this episode, feel free to visit LivingWealth.com/e29.