Like when I thought about this the point is instead of a 5 29, it’s a way to fund the kids’ college. So the parents would be the owner until they’re 18 at least. Well, but then the danger is that now they have access to it. At that point, this example was for people asking for their newborn or a one-year-old and starting the policy now. I think starting policies on them would be a good. And I would say if you have a child who is putting an income, once they started putting in an income, decent income in their twenties or so.
A kid probably maxes out or would you say four or five grand a year? It’s not worth it. And most of the people doing these IBC they’re putting at least 25,000, $50,000 a year. In which is a strategy where it works, you pay your kids, really? What are you gaining from this? So you can pay five to $6,000, which is the standard deduction where you don’t have to file taxes, but like at a 20% tax bracket did all this work and in the book effort for what, 1500 bucks. And this is a big video or like podcast episode that people like use as clickbait just to sell views and listeners. Of course! And then another thing it’s very similar to people talk about, oh, I’m going to pay my kids a salary or put them on my taxes. Another con would be, the kid has access to the cash value where you have to be careful with that. Your child can still access and use it and have access to the cash value and benefit from it that way, even though they’re not the ones being insured. And then also when you pass a death benefit, then can transfer a generation earlier and having it on your child. You’re able to maximize your dollar and have it grow throughout your life. My personal recommendation would be maximize policy on yourself. Not really much in the sense of cash value and utilization of a cash value, but it does have a benefit that it’s a policy on the child. They could only contribute four to 500 a year. Doing it over the over seven years, it would drop. What that results in is a very small amount that you could contribute so that resulted in seven grand a year, max, that this person could put into that policy for the child in order for it to have the maximum cash value, growth and dollars, only over five years. One example we recently just did as a parent had $1.6 million death benefit so that the child’s policy could be no more than an $800,000 death benefit. It doesn’t make much sense because you’re not going to get any too much of anything.Īnd I’ll just add, so that limitation of 50% of the parents total death benefits so what they’ll look at is they’ll look at the parents and see how much total death benefit the parents have. And your baby, in this case, or a young kid doesn’t make any money so they can’t get very much. The big thing here is yeah, it’s cheaper to buy insurance per kid, but the problem is like a lot of these insurance payouts is based on how much money you’re making today, based on your pay stubs or salary or tax. People are asking why don’t I do like an IBC policy for my kid, or they hear us talking about using this in lieu of the 5 29 plan, which I’m not a big fan of for their college savings or education.