EP. 98 | Is Multi-Generational Legacy Planning for You? with Christian Allen and Rod Zabriskie

Today's show is sponsored by Money Insights and their Investment Optimizer strategy. In my book, I share how I use the same strategy starting over a decade ago to invest my money in two places at one time. This strategy has been used by the wealthiest for generations for estate planning, minimizing taxes, preserving wealth and increasing stability for their investments. Now you can do the same thing. In addition, you can build a plan to build an emergency fund, pay for coverage, college fund, a business plan for retirement, and ultimately optimize your total financial picture. To find out more information, check us out at the banking link@nextlevelincome.com on today's show, we have Christian Allen and Rod Zabrisky, my friends from Money Insights. You've probably heard Christian and Rod on the show before when we've talked about the Investment Optimizer, a strategy that I've personally used to increase not only the returns on my portfolio, but also give me access to valuable cash when I need it the most. Christian Rod, are joining us again today to talk about multigenerational wealth planning. I'm really excited to have them both on the show.

Welcome to the Next Level Income show where it's our goal to raise your income, investments and life to the Next level with your host, Chris Larson. Get your free copy of his book@next levelincome.com book or also if you're an accredited investor, check out the Invest link to learn how to gain access to institutional quality real estate opportunities.

Christian Rod, welcome back to the show. Thanks.

Super excited to be back with you, Chris. Thanks for having us on.

Absolutely. It's always a pleasure. So for those that are listening today, they haven't heard some of the background. I want you guys to go into it a little bit. But I've often told the story. Chapter three of my book I called the Opportunity Fund. And I got really frustrated with my insurance agent several years ago because after I revealed to him that I was using the cash value in my life insurance policies to fund real estate deals, he said to me, chris, I wish everybody did this. And it was like, why didn't you tell me you knew I was doing this before? Why didn't you encourage it? So I went on this search and I found, I found the two of you. And I was like, this is a blessing because you guys are pros at not only structuring really high cash value life insurance policies, but you guys are business owners, you guys are investors. Use this strategy yourself. So if anybody hasn't, you need to check out our website nextlevelincome.com, go to the banking link and you can find more information on the Investment Optimizer. But today I want to tell a story. Over the holidays I was talking to my father in law and we started talking about what was going to happen after my in laws passed away. And specifically we were talking about the transfer of money and life insurance and this whole concept of generational planning kind of came to be. And I was like I said to him, I'm really glad you brought this up because it's something I've been thinking a lot about. And for anybody that's been following the show for a while, read the books, they know that I like to learn. Like what do the rich do? Like the ultra rich. I was just with a gentleman. He specializes in working with families worth $250 million or more. He's actually just on the podcast DJ Van Curren. So families like that, like what do we do? And that's what we're going to dive into today. So gentlemen, maybe you can share a little bit of background on how you all kind of develop the framework for what we're going to be talking about today.

Yeah, maybe I'll kick it off for us. So anyone that doesn't know us, right. We our firm, Money Insights is a, is of wealth building firm for high income earners. And, and we do a variety of different strategies, but we have a couple or a handful of kind of core strategies that just end up being sense for most of the people that we work with. One of those is the Investment optimizer. Right. Well, so what happened is the concept we're going to talk about today, which we call a generational leg planning is, is kind of an offshoot or a build a building block or let me try to say that the other way around, the Investment Optimize ends up being a building block for what we're doing inside of this multi generational legacy trust that we're building. But at the core of it, it's a really simple and great way for people to transfer a portion of their estate in a really tax friendly, macro effective way. And I think that's kind of the core of it. So and we can get into the details on exactly how each piece. I'm ready to do that when you're ready to. But eye level, Chris, that's kind of where the concept came from. And really we borrowed the terminology from one of the big insurance companies who produced this specific concept. So it's kind of the stuff that we do with the Investment Optimizer and with Premium Finance and some of the other strategies that we use in conjunction with this concept of multi generational legacy planning, bringing those together, that's the concept we're going to be talking about today.

Awesome. So, Rod, why don't you just kind of highlight real quick the couple strategies that Christian just mentioned with respect to kind of the investment optimizer, if listeners aren't familiar with it, and then also the Premium finance.

Yeah. So the investment optimizer is basically a way to add another layer of profitability on top of the investing that people. People are already doing. Specifically, like Christian said, we tend to work with people in the alternative space. We work with a lot of business owners and real estate investors, hard money lending, crypto, a lot of different things. Yeah. And they're already doing really cool things. But one of the inefficiencies that they just inevitably find is that when, when you look at where you build up your cash or kind of set aside the cash as you're receiving rents or whatever that might be, you build that up and eventually you're going to take it back out and invest something else. Right. But when it's there between the deals, it's not really doing anything for you. And that just. Well, it could.

Does a couple.

It's a couple. Obviously, number one, we always want our money working for us in every way. Right. And we feel that even more right now with these high inflation types of things. So that's key. But then because of that, what people often end up doing is they're so anxious to get the money out there, they may not always make the best decisions with their investing. They want to speed the process up. They're so anxious to get that money working for them that they might skip some steps or cut corners. And so they may not go through the same process as they would if they were really going to take their time. And so what the Investment Optimizer does is it's a place where we can do the same thing as far as flowing the cash, building it up, taking it, investing it, creating more cash flow and capturing that, the opportunity fund, like you said, but doing it in a much better way. And so we use highly overfunded cash value life insurance policies to do that.

Why?

Because, number one, we can create some return, number one. Number two, that that return is tax free. And then, number three, there are some additional kind of just efficiencies that we can create, arbitrage and whatnot to just create more benefit.

More.

Just doing something for us.

Yeah. More Value.

Yeah, that it isn't doing if it's just sitting in the savings account. So in a nutshell, that's the investment optimizer.

Yeah. And again, if you haven't heard this strategy before, check out the website, it's under the banking link. But this is something I've been using for a few years now with your all's help. And I feel like we really, really kind of optimize the optimizer, if you will, by using a line of credit as well. And it's, it's just been, it's been great because I think. Yeah, go ahead.

That's, it's a great point, Chris. And we just, just did an episode specifically on the value of using the cash value line of credit. Because I think like you said, we've been doing with a lot of clients and it makes sense, right, because you're decreasing the interest you're paying and just you're earning the same interest rate but you're paying less. Like it's a win, it's a winning situation. But if you want to get into it in detail, like you can, you can go to check out the podcast and we just, the last one we did, it's a short episode on just what are the benefits of the CV lock. And I do think for someone that's interested or intrigued by using cash value life insurance as an asset, the growth mechanism, for anyone that is thinking along those lines, adding that additional layer, the cash value line of credit is just a no brainer, it just makes sense, provides significantly more value and again, it takes very little extra effort to put into place.

Yeah. And look, let me illustrate that. So last year inflation was between say 5 and 15%. So let's use a round number and say it was 10%. If your money was sitting in the bank waiting for a deal and you had 100 grand, you're losing $10,000 and you might say, oh well, it was only 5%, still losing $5,000. So again, just to summarize it, this is a strategy that allows you to not have that liquidity drag that I talk about here that makes a big difference. Yeah. And then real quick, Rod, as far as premium financed insurance, what's the kind of the core of that strategy?

Yeah, great question. So in this case, what we're doing is we're building a life insurance policy. And there are a lot of reasons why someone might choose why they want to build that policy. It can create future tax free income. It can be a really big piece in terms of people's estate planning, etc. Right. So we won't get into all of those kind of purposes. But for someone who wants to do they value the life insurance and what it can do for them, but they don't want to pay the premiums.

Right.

Let's just be honest about what it is.

Right. Okay.

So what we can do likes, who.

Likes to pay insurance premiums?

I mean just if you don't have to, why would you choose to? So in this case, what we're doing is we're going to set up a loan through a bank and through that loan we're going to finance the majority of the premiums for that policy. So the individual going to put in a portion, it might be 10%, 20%, something like that, but the majority of the dollars going in we're going to finance through a bank. And we're working same kind of arbitrage we talked about a minute ago with the cash value line of credit. We're creating a larger return inside of the account and accruing less interest on the loan. And so over a long period of time, we just end up with a lot more value in there. Especially when you go back and you measure a return off of that. We're measuring the return dollars you put in and yet you multiplied that, right. Four or five times, nine times what you put in. And so it just amplifies the return.

And for, for just some like emphasis on that, you know, you can expect, based on where we're at today, to be in the 15 to 20 turn over, over the, you know, over a 20, 30 period of time, 30 year period of time, which again, like consistent, predictable, you know what you're going to get. Anyway, we, we can get more into that, those details too. But again from like a, it's just a, it's just one of those things for the right people. It just makes a lot of sense.

Yeah, no, and my whole point in all this, these are strategies that in a lot of cases weren't even available to those that weren't ultra wealthy. And now we're seeing those be made available to people that are just ordinary wealthy, if you will.

Ordinary wealthy. And it's changing, it's becoming more and more advantageous for everybody across the board. There's a new strategy Rod and I will be rolling out. We're calling it the Capital Avalanche. We haven't rolled it out officially yet. Yeah, that's right, the Capital Avalanche. And there's a cool, there's, there's a reason behind that cool name. I self proclaimed Cool name. But there is a reason behind the name and it is a medium finance strategy designed to produce a return. And so using things like this, like that, in conjunction with the, with the more holistic generational planets planning that we're going to talk about, it just starts to come together and can do a lot of things for us.

Awesome. Well, that's a great transition. So again, as you, you're an investor, you're listening to this show, you've educated yourself, you've diversified from the stock market, you're in real estate, you have insurance. Now you're coming up to the point where you're looking at your children or maybe your children's children, your grandchildren. Who is this strategy for? Who should start to think about these things?

Yeah, that's a really great question. So, in terms of benefit, right. The reason we call it multi generational legacy plan is because it's going to benefit regenerations. So maybe I'll just touch through, kind of talk through how the actual concept comes into play. Think of it this way. Let's just say we're going to name each one of us as a generation. I'm going to be the old guy. I'm Generation One. Chris, you're going to be my son. Generation Two, Rod, you're going to be Chris's son. And Generation three. Does that sound good?

All right, yeah, I can go for that.

Okay, so generation one, me, I'm going to initially purchase an insurance policy. And again, it's a high cash value policy, just like we always do, Minimum cost, maximum cash. I'm going to purchase it on your life instead of my own. Let's say that I'm 67 years old and you're, you know, 45 as an example or whatever. So.

Pretty close, by the way.

Hey, we. We were in the ballpark. You. You don't look that old, Chris. Not the.45 is old. Should I just clarify that? Thank you.

It's not old.

I'm not 45, for the record, but I did just shave, so.

Okay, that's.

Yes. Last time you guys saw me, I had my. I had my. That's what.

That's. I knew there was something different about you, that. It was a nice beard, by the way. Okay, so back to our generation. So me, Generation One, I buy a policy on Chris, right? And while we're living, while I'm living, I have every access to that. I own the policy. Well, I shouldn't say the, the, the. The trust own the policy, but in terms of initially, I am buying the policy. On generation two, my kid. And then I'm going to use it like I would otherwise. But again, the difference is that the policy's death benefit is not on me. And at the time of death, now the gen 2 is going to receive not the death benefit, but they're going to receive the cash value. Right? So let's just say I had put in, you know, $500,000 five years, and then I pass away 17 years later. And now I'm passing along $1.2 million of cash value in the policy itself and let's call it a three and a half million dollar death benefit. Okay, Now I then as to can use that in all of the ways that generation one could. I can use it to invest in real estate, I can use it for, for education, I can use it for anything I want. That's the point, right? Pass down a legacy from generation one to generation two. So now what happens is that when generation two passes away, Chris, you die. And now Rod, generation three, who does look a little old for being your. For being grandson.

I was appreciative that you kind of reversed it. Yeah.

But then, okay, so Rod, generation three, he now gets to take control of not just the cow, but also the death benefit. And in that way, Chris, it ends up literally benefiting generation one, two and three. And as Rod's going to talk about here, a little bit more can be taken on another level and do what we call family banking or generational family banking.

Or do you like to Perpetual family banking?

Perpetual family banking. So yeah, Rod's going to talk about perpetual family banking.

I love it before. So quick question. Okay, so how are these usually structured? So if you set up the policy on me as Gen 2 is the second generation, I have access to the cash value. Do I also take over the premium payments at that time? How does that typically work?

Ooh, that's an interesting question. So normally, Chris, as you know, the way that we structure these, they have a lot of flexibility in terms of how long we can actually pay them. So most of the policies that we put in place, really all of them in this concept, have been designed in a way that they'll be fully funded by Generation 1. So 2, we could keep it open so that Generation 2 could continue to add money into money. Like if they, if they're buying into the get it, they want to continue to build on it. We can absolutely leave that open. But inside the concept, generation one is going to be using cash that they're not otherwise likely to need. Right. So we're and I probably should have clarified this. We're talking about who it's for. It's usually for someone older who has, who has liquid that they're not likely to use. They want to have, they still want to have access to it because they might need it for, you know, they might need it for income, they might need it for an investment, but the is that it's not money they are likely to use. And then that money can then. And when I say use, I mean use in terms of need to just spend. Right, Right.

Yeah. Lifestyle, just day to day expenses. Right.

Yeah. So anyway, that, that kind of is the, the to it. But in terms again of funding all funded in generation one, we can usually do it in four or five years.

Oh, wow, that's okay. So four or five years. Because I do know I've had some conversations with, with investors and different people and that's a concern. They're like, well, I want to, I want to put this in place on my child. Maybe I'm too old. You know, maybe they're too old. But then there's that concern like, well, are they going to have to keep paying it? Like, what's going to happen at that.

Point, Chris, that kind of makes me feel like I should add another kind of element because I mentioned this new concept that we're going to be talking about. One of the benefits that this concept has is that we can do something similar, but in only one lump sum premium. So in other words, this has been a challenge for us historically. People oftentimes they run into money, they have money, they, they like the concepts. They, you know, they know that there's value there. They like the safety, the liquidity, the returns, all of those things. But it's like, ah, do I really want to make a commitment to doing it more than one year? Well, one of the things that we're able to do inside of this new strategy, and it's a, and it's a premium financing, but we can actually fund the policy completely in a single year, which makes it pretty unique. And so we can plug that same concept into the multi generational kind of overall structure or concept and utilize it in a similar way.

Terrific. So Rod, you're about to talk about perpetual family banking before I derailed that conversation briefly here.

No, yeah, the people that we have these conversations with, and I think your story kind of illustrates this, they have, they have plans. Right. They have a legacy that they want to live leave. Yes. In terms of money and, or assets, but usually also in terms of values. And philosophy. Right. An approach to life, to building wealth, to all of those things. And so what this does is it kind of incorporates the kind of money side of it into that. Right. And so when we talk about generation one, using the funds, passing on generation two and, and then on to number three, it usually go. Comes along with the. A guidebook, so to speak.

Right.

In the form of a trust. Right. And a trust is nothing more than instructions on what's supposed to happen with these assets when generation one passes. And so in that guidebook, it would. The trust would actually be the entities, quote, unquote, that takes over the ownership of the policy when generation one passes. And it's instructing generation two as to, you know, these are our wishes. Now, having said that, it doesn't have to be super specific. It can be.

Right.

If we have someone who is very specific on what they want to have happen with that money, they can do that. They can restrict it to only certain, you know, uses. But we have a lot of people who are like, hey, you know, they can use it for whatever they want. I'm teaching them sound principles. I want them to be able to use the funds for whatever, you know, makes sense to them, to kind of carry on this legacy. So it can be as specific or as kind of loose as you want it to be. But ultimately that's the structure that allows it to then pass along and become a true legacy. Right?

Absolutely. Yeah. We just went through this, this process ourselves kind of planning, re. Upping our, our, our state plan and everything like that.

Yeah, yeah, absolutely.

No, it's, it's important. It's like you, you try to instill these values. So the conversation I was mentioning with, with D.J. talking about families, $250 million plus families, we started talking about. You started telling the story about the Vanderbilts, which I know well because we're. I can almost see the Biltmore from my house here.

Okay.

Yes.

Which Vanderbilt son built. And they had just a couple about 20 years ago or so. They met at Vanderbilt University and there wasn't a single millionaire among them. They. All the wealth was lost in a matter of a few generations. Whereas the Rockefellers with the Rockefeller rules were able to perpetuate that wealth because they have the rules and those lessons. So I'm going to have to come up with like Larson's Laws, you know, I can't have the.

There you go.

Yeah, I like it. But yeah. So these, again, if you're listening, like we are talking about strategies today that are what the ultra rich Use so you can do the same thing for your family.

Yep. So now getting back to the perpetual family being, what we're doing with this is we're taking something like the investment optimizer or the capital avalanche strategy, and we're just including directions with the trust to continue to do that. So, for example, in this, this hypothetical that, that you guys gave all that money that came to me. Thank you, dad and Grandpa, then. But it comes with a set of instructions. It's like, okay, you're going to take this money and you're actually going to go out and create new policies on, on myself if I'm young enough or on my kids.

Right.

If I'm kind of in the situation like what Christian described initially. And, and we're just going to continue this, this cycle of, of building this wealth. And obviously not just in these policies. Right. Especially using the investment. You're. You're also investing in real estate or in businesses or in other things like that. You may have some philanthropic things that you're doing as well. And so, you know, that side of the leg. But the point is that we can continue to take advantage of these same basic principles that we're talking about today of to cash value while you're living for these types of things. And then this big jump when the death benefit pays out. So if you think about your typical kind of compound growth curve, it's the same kind of thing, but it has spikes in it. When that death benefit pays out, it turns that cash value, the, the $2 million into the three and a half million dollars in an instant. And then the next generation is taking those funds and now funneling them into a new plan that then just creates that same spike when they pass away, et cetera.

Yeah. And that's what I think. It's hard. I have conversations with investors and they talk about break even, like, oh, I can invest this money in the stock market and I'm going to get this value. And I think what those people are leaving out is they're saying, oh, here's the rate of return. If I quote, unquote, invest this in a life insurance policy, which I never called an investment, but they're not looking at the death benefit that comes with that. They totally leave that out. They say, oh, if I had term insurance, but you can't. Is it possible to utilize this policy with term insurance like a combination?

I mean, in the terms of taking means and turning into a death benefit? Yes. But then you miss all of those intermediate steps.

Right. Using the money and potentially Turning it into a death benefit. Like the whole idea between term insurance is that you die while the policy's there. But guess what, it's, it's difficult to pay for premiums when you're 92. In terms of term insurance, all my.

Grandparents and great grandparents lived into their 90s. So that's, that's a little, I mean, can you sell termin. Do you guys sell term insurance policies for people in the 90s?

No, no, no, no, no. I mean it's not even feasible. It doesn't even make sense. And really, you know, any policies for people in their 90s. Now I say that selling at that point, but tons and tons of people have made the strategic decision to do something in the permanent life insurance space prior to that point. And so they're at that stage, they, their policies are just loading up with cash. They're not feeling the potential increase in cost of insurance because there's so much capital in it that's producing the ongoing return. Again, regardless of what type of life insurance it's in, as long as it's structured really well, we can get a reasonable, a reasonably good return. And that's, that's especially critical when we're, when we're using it as a. You add not the investment. Right. We're adding as a way to, like Rod said, add profitability to all the other things. And I think it does the same thing with estate planning. It adds another layer of profitability, access, liquidity and opportunity that we just don't get if we don't use it inside, in function with what we're doing. From an estate planning perspective.

Yeah. It's also very. The way I see it's is this is a very non selfish strategy as well.

Yeah, great point too. So if you're someone that cares about generations, generations to come and we have a lot of people who are this way. Right. Especially as people older, they start to feel like it's not as much just about me. I want to, I want to leave a legacy. I want to leave, I want to leave something of significance to my family and to my kids. Children. And so for those people, that's, that's the type of people that concepts like this will really resonate with nothing.

That's fantastic. So if you want to learn more about all three of the strategies that we talked about today, you can go to nextlevelincome.com, click on the banking link, you can put your info in there and we're happy to reach out. Or how else can people get in touch with you guys to learn more about this Rod and Christian.

Yeah. You can go to money insights.net anytime. We have all of our contact information. You can, you can reach us there. You can get a hold of either one of us at Christian or rod@moneyinsights.net separately, Christian@money.net and rod@money insights.net and Chris, they can just reach out to you and we've got a great relationship and I guarantee that you'll pass their information along.

Indeed. We even have a new book coming out that we. We work.

Yes. I'm super excited about that, Chris.

Yeah. Should we give them a sneak peek? Let's do it.

Yeah, I should because you've got it right. You've got a physical copy.

I do. I don't know how they got. They got dropped in the mail here. So yeah, we actually wrote. You guys have a terrific book. I got the intro here. Money Insights for sales professionals. So if you're a sales professional, it's not available yet, but just email me, chris@nextlevelincome.com say, I want the Money Insights book and we'll make sure you get a copy.

Love it. Chris, you did a great job with the intro on it. I thought it added a lot of value overall project. So thank you.

Thank you, gentlemen. It's always great to see you, Rod, Christian, thank you so much for being on the show today.

Thanks, Chris.

Thanks, Chris.

Hey, Chris, here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.