The Rockefeller Strategy: Building Generational Wealth with Trusts and Cash Value Life Insurance
- kaysadiq
- Aug 19, 2024
- 4 min read
Have you ever heard of the Rockefellers? Probably. But are you aware of the strategy that the Rockefeller family used to maintain from generation to generation? Well, the cat is out the bag and you, your kids, grandkids and future generations too can benefit from this strategy.
Their approach combines strategic use of trusts and cash value life insurance, creating a perpetual wealth cycle that not only preserves assets but also provides a reliable income stream for generations. Here’s how the method works and why it’s a powerful way to build perpetual generational wealth and financial security.
1. The Power of Family Trusts
The foundation of the Rockefeller method lies in setting up family trusts. A trust is a legal structure that holds and manages assets according to specific rules set by the family. These trusts are essential for protecting wealth from creditors, lawsuits, and excessive taxes. More importantly, they give the family control over how the assets are distributed and used, ensuring responsible financial management across generations.
2. Leveraging Cash Value Life Insurance
The assets within the trust are often used to purchase cash value life insurance policies, such as whole life or indexed universal life insurance. These policies offer both a death benefit and a cash value component that grows over time. The cash value grows and compounds tax-free and can be accessed during the policyholder’s lifetime through loans and withdrawals without triggering taxes.
3. A Continuous Income Stream and Liquidity Source
The cash value in these policies can be used strategically, to fund investments, cover expenses, or pay the premiums for other policies. By using policy loans, the family can access funds without diminishing the death benefit or triggering significant tax events. The trust can then repay the loans, ensuring continued growth of both the cash value and the overall policy benefits.
4. Replenishing the Trust with a Tax-Free Death Benefit
Upon the death of the insured, the tax-free death benefit is paid back into the trust. This payout replenishes the trust, ensuring that the family’s wealth continues to grow and is available for future generations. This cycle of wealth transfer is at the heart of the Rockefeller strategy, creating a perpetual system that benefits both current and future family members.
5. Guiding Future Generations with Strategic Control
The trust is more than just a holding vehicle—it’s a tool for guiding how wealth is used. Families can set specific rules, guidelines, and conditions for accessing funds. Combined with financial education and coaching for heirs, this ensures that future generations not only inherit wealth but also learn how to manage and grow it responsibly.
Why This Strategy is So Effective
By combining the asset protection and control of trusts with the growth and tax advantages of cash value life insurance, the Rockefeller strategy creates a powerful system for preserving and growing wealth. The key lies in its ability to provide liquidity, protect assets, and ensure tax-efficient wealth growth and transfer across generations.
And you know what, implementing this strategy for you and your family is very well within your reach.
In Summary:
Set up a Trust (a Trust is like a registered corporation and is considered a legal entity) --> Purchase a Cash Value Life Insurance policy on all members of the family --> Make the Trust the beneficiary of the policies. --> Each time a family member passes, the death benefit is paid to the Trust --> The Trust continues to grow and accumulate a pool of cash that the other family members and future generations can use. --> Family members can present their business proposals and investment ideas to the board of the family Trust for low or zero interest funding. They don't have to go seeking bank loans. --> Therefore, giving them a significant financial head start. When members of the family welcome a baby, a cash value life insurance policy is purchased on the child (at a very cheap rate since they are children). And the cycle repeats itself over and over.
Walt Disney and McDonalds are few of the popular businesses that have borrowed against their cash value life insurance to grow their business when they couldn't access traditional bank loans.
Let's see this in numbers:
Simplified Sample Scenario: A family of 6 - father, mother and 4 kids aged 2, 4, 8 and 10.
Each child has a $500,000 Universal Life Policy. And this is costing them $120 a month for only 20 years. Meaning, each child would pay a total of $28,800 through out their lifetime and would have a life insurance death benefit of $500,000 for as long as they live.
This means that for $115,200 ($28,000 x 4), the children have a combined death benefit of $2,000,000 ($500,000 x 4). Therefore, by spending a total of $115,200, the trust is sure to accumulate wealth of $2,000,000 in the eventual passing of all of the children (in their old age hopefully). this $2,000,000 can be invested by the trust, in ways that guarantee the principal and still allow it to make a profit through segregated funds or real estate. And the entire family can leverage the cash and investment in the trust to perpetuate their businesses and investments without needing to go to the bank or pay interest loans. It is like pooling resources to grow a "cash" company faster and bigger than any single family member can do on their own - with bigger and larger financial benefits to all family members.
Depending on the family's assets and liabilities, each death benefit can go as high as $5,000,000 (or more) per child - with a combined total of $20,000,000 in tax-free cash (obviously with higher monthly premiums but still relatively much cheaper than the size of the death benefit). And so, you begin to understand how powerful this tool is in controlling and ensuring perpetual wealth is created in the family from generation to generation. Are you beginning to see how powerful this strategy is?
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