Girl on BenchYou may be asking yourself why Tom Hegna, author, economist, and retirement expert, is telling us not to leave any money to our children. Perhaps this article will help answer your questions.

According to Tom, as 78 million baby boomers are marching headlong and headstrong into retirement, many of them are discussing how much money to leave their children. As the millennial generation moves out of the house and into the real world (at least for a few months), many boomers are looking to leave a little something to their children and grandchildren. Like Mark Twain says, “Thrift is a wonderful virtue, particularly in an ancestor.”

Estate planning is all about transferring your wealth and assets to your family (or favorite charity) in the most tax-efficient manner possible. Tom’s advice: Do not leave your children or grandchildren any money. He repeats, do NOT leave your children or grandchildren any money! Set up a life insurance policy to leave a legacy so that you can spend pennies and your heirs will get dollars.

Here are three reasons to leave your children life insurance rather than money:

Reason 1:

Avoid income and estate taxes. With life insurance, there is no income tax on the death benefit upon receiving it. Also, if structured properly, you can use gifting strategies and irrevocable life insurance trusts to avoid estate taxes. Each state is different, so make sure you understand exactly how it works for your community.

Reason 2:

Why spend $100,000 to leave $50,000? If you are able to put $100,000 into a policy, the policy would pay out a significant amount more.

Reason 3:

You have access to the cash value of your policy in case of emergencies.

With life insurance, you gain a tremendous leverage. For example, depending on age, gender, and health, instead of leaving children $100,000, mom and dad could put that $100,000 into a life insurance policy and leave Johnny and Susie $200,000, $300,000, or even $500,000, income tax free.

If the policy is set up properly, the money can remain estate tax free as well.

George Steinbrenner’s heirs were big beneficiaries — they inherited the New York Yankees and the rest of his financial empire was free from estate taxes.

Tom Hegna has been presenting financial estate planning to people all around the country and one slide that tends to stand out and resonate the most with attendees is the “Don’t live a just-in-case retirement” slide. Many seniors today are living a “just-in-case retirement” and not enjoying their Golden Years as much as they should be.

One of the key elements of this deals with leaving a legacy to children. Mom and dad live a diminished retirement because they want to leave something for Johnny and Susie. They don’t spend their money, then what happens? They die. What happens to the money? It goes to Johnny and Susie, who then use it for the reason their parents were saving it for — a new boat, the country club, a cruise, etc. This paradox can potentially be solved with life insurance.

If you decide up front how much you want to leave Johnny and Susie, you can use the money from a life insurance benefit to go to your children, estate and income tax free. Again, this gives them the freedom to spend the rest.

Tom’s books and articles often reference “the optimal solution.” Optimal may not always be the best, but it means, “The best more often than anything else and it will never be the worst.” With the power of life insurance, you can spend pennies and leave dollars. This is the optimal way to leave a legacy to the children. The baby boomer generation has been touted as a career-focused and workaholic generation. It is time for them to reap the benefits of their hard work.

Americans are widely underinsured and most have no idea of the benefits life insurance can offer. Make sure that you understand how securing life insurance will give you peace of mind to spend your hard earned money.

Don’t leave Johnny and Susie money, leave them life insurance. Hopefully, when the kids find out that they aren’t getting any money, they will finally move out.