Not a day goes by that I hear from a grandparent voicing that all too common financial concern. "How can I help my children and grandchildren now instead of later without jeopardizing my own retirement plans and also be able to afford quality health care in my old age?" Crystal ball anyone?
A good starting point is to find out if your adult children are on the right path for financial success. Without being too intrusive, you can ask them a few questions that should give you insight about their ability to save for a rainy day and provide for your grandchildren's post-secondary education:
These three investment programs are designed as building blocks that lead to a successful financial future. If your children don't know what you are asking, then you should be concerned. Then ask them one more question:
If your children do not have any insurance protection coverage as far as they know (they may wrongfully assume that their employer is taking care of this for them), then you have every right to be worried. The future of your grandchildren is at stake.
It would be nice to hope for the best, but as things appear today, you might want to start planning for the worst. You don't want to find yourself in a situation with a lot of mouths to feed at the expense of your financial well being. Selling out of your nest egg earlier than you planned is stressful enough but the added tax bill and potential clawback of government benefits just adds to your financial pain.
To avoid this potentially dire situation, make sure your children are properly insured. This will allow you to sleep a bit better at night. But if your grandchildren's future suffers because there is less money available for education, this is where you can help. By planning ahead you can take advantage of programs designed to benefit multiple generations without jeopardizing your financial security. One such financial planning strategy involves strategically shifting assets from an "investment box" to an "insurance box."
Shifting money from your "investment box" into permanent life insurance policies that you purchase in each of your grandchildren's name can accumulate over time, giving your grandchildren access to funds that may help them later in life. You are the owner of the policies and you pay premiums into the policies in excess of what is needed to pay for the insurance. This creates cash value. At some point in the future, you can transfer the ownership of the policies to your grandchildren and they could use the built up cash value in the policies to help pay for their post-secondary education (for medical school), or even help purchase a new home.
Strategically shifting your assets, while still maintaining control means that money is available in an "insurance box" for either you (if your financial needs change or health deteriorates) or your grandchildren. No one knows what the future has in store for us. This is why the flexibility of this financial planning solution is so appealing.
Another important consideration is the issue of "insurability." By putting coverage in place today on your grandchildren, that coverage will continue even if your grandchildren later become uninsurable. This can be quite valuable later in life if they need life insurance as collateral for a loan, mortgage or business buy-sell agreement.
By insuring the lives of each of your grandchildren, you can invest in a valuable, tax-efficient solution that can be gifted to your grandchildren. They can use this gift to access money for important life events or keep the insurance to provide a lifetime of income and debt protection for their family. Then they can gift this policy to your great grandchildren or great-great grandchildren. What a legacy and tax-efficient intergenerational transfer of your wealth.
Before implementing any tax, investment, life insurance, or estate planning solutions it is best to seek professional advice. Have a licensed financial planning advisor uncover the weak links in your plans, help you navigate through your options and implement the correct solutions. Don't just leave your plans to chance because without structuring your family's wealth and estate plans properly, often, bad outcomes occur.
Secure the dog house and invest wisely, then you can enjoy life & have fun.
About the Author
John Niekraszewicz (Nick-ra-shev-itch) BMath, FCSI, CFP, FMA is the Certified Financial Planner responsible for the AHIP Association Health & Dental Plan provided by JVK Life & Wealth Insurance Group. John is also the Principal of JVK Life & Wealth Advisory Group, specializing in Wealth & Estate Planning. John welcomes your questions and can be reached at 1-800-767-5933 or email@example.com
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