How to Teach Your Family About the Perpetual Wealth Strategy
About this Episode
We often get asked the question, “How can I get my children involved in family finance practices?” Today we’re talking about how family adoption of the Perpetual Wealth Strategy can lead to both better immediate financial habits and the creation of multi-generational wealth. One of our Wealth Strategists and a long-time client share their personal stories, experiences, tips and best practices for getting each member of the family actively involved in family finances.
Key Takeaway Timeline
0:57 – Introduction to Aaron Chapman and Wealth Strategist Gary Pinkerton
1:55 – What does it mean to leave a legacy?
3:10 – Incorporating life insurance and financial education into family finance practices and legacy planning
6:16 – The two destroyers of multi-generational wealth
7:42 – Aaron Chapman’s background and story
9:49 – How Aaron restructured his view of legacy
12:40 – Aaron’s approach to bringing his children into family finance practices
14:46 – Aaron’s family finance practices
17:58 – How Gary and Aaron are protecting their families’ wealth from taxes
18:57 – How to get your family started
22:10 – Equipping children with a plan to protect assets if parents pass away unexpectedly
24:03 – How Gary’s son invested in international real estate
26:28 – How Aaron’s family is building multi-generational wealth through cash value life insurance
How to Teach Your Family About the Perpetual Wealth Strategy
I’m excited about the episode and couldn’t be happier to have you here with us. We have two incredible guests, Gary Pinkerton, one of our wealth strategists at Paradigm Life and Aaron Chapman, a Paradigm Life client and a longtime finance veteran. We often get asked the question, “How can I get my children involved in family finance practices?” Gary and Aaron are true experts in this arena and have mastered family adoption of the Perpetual Wealth Strategy, in which each member of their respective family is actively participating in family finances. They’re going to share their own stories with you along with specific tips and advice for mastering your own family’s adoption of this strategy. Let’s get started.
Patrick, thank you for inviting me to co-host this episode and the opportunity to talk a few minutes with a close friend of mine and client, Mr. Aaron Chapman.
Gary, thanks for letting me on and Patrick, as well, for introducing us and letting us participate. This is a cool opportunity and I am happy to be part of it. Thank you.
Aaron is one of my most favorite people on the planet and that’s probably because Aaron and I are incredibly passionate about the same things and much aligned in our thought process. Our topic is one of those examples, life insurance for family members. It’s one of those protected wealth strategies that families don’t talk enough about and yet it’s vital to the legacy that all of us want to pay forward. That word legacy is charged with all kinds of messed up meanings. Aaron, you’re writing an amazing book, which you allowed me to take a look at it. What is the main thing that people mess up when the word ‘legacy’ is thrown around? What are they thinking?
When I looked up legacy, because I hear that a lot, a lot of think-tanks, business meetings and people talk about this legacy. When you look up the definition, the first thing that you find is monetary. It’s frustrating that when you think about the globe and all the people who’ve been on it and what was left behind in this life, the majority of the people on this planet that left never left the legacy by definition then. One of the other things that you brought up is people fail to even talk about legacy. The reason they don’t even talk about it, they don’t even get into the discussion about it is because they don’t know where to start. I believe they’ve already taken apart by the fact that they don’t believe they’re going to leave anything for their family anyway so why do they need to get into the conversation? They had the legs cut off by the definition alone.
They’ve discounted what’s legacy, it’s not the dollars. We’ll certainly get into that. This is a strategy, incorporating life insurance, incorporating family education and things like that into their family and bringing in trust and things. That’s something that’s commonly used in the wealthy in America and it has been across the globe for generations, for centuries. It’s commonly used in a family office environment. You have those ultra-wealthy that have always done it for generations. You have this concept of family office and maybe some of the readers are familiar with what a family office is. It’s a private wealth management system. It’s a team of trusted advisers that either work directly for one large family, think of the Rockefellers, or they work for several families. They only work for people who have this higher net worth and can afford to bring in counselors about all things financial in their life. It’s common there. It’s not common for the middle class, for the common man out there. It’s as important for them but it’s not used there. I believe that it can be and I know it’s Aaron’s beliefs that it can be. Do you have any thoughts on that?
I think that’s been made too complicated to get the common man to believe that it’s possible. I had the idea of how I want to implement these things. With all the travel that I do and all the people I’ve listened to and the things I thought, how am I going to pass this on to my children? How am I going to make them responsible for it? That’s one thing that the world is good at, taking responsibility for anything. This is how this is going to go. I’m bundling out all the details of it. As I started talking to my attorney and talking to other people, you can’t do that. You can’t do it that way because the rules read a different way. I’m having to change it. I even have changes done up until the last two days because it becomes complicated and cumbersome. You can’t hand somebody something and say, “This is what you do with it.” There are other people involved that can claim that even though they were nowhere near around you. It’s interesting how we have built a system and a society that protecting what is yours is very complicated.
Given the economic trends that are out there, given the debt that we’re passing forward to our children, given the fact that the education system has made it almost as bad as talking about religion to talk about finance. I don’t know why that is. There’s a lot of conspiracy theories out there about why it is. Maybe they’re all true. The bottom line is if we don’t personally get involved with our family unit, then our kids are not going to know anything about personal finance and beyond how to complete their checkbook and what credit cards to get as the best ones. It has been known throughout history. It’s been studied by people like Napoleon Hill and beyond that there are two major destroyers of multigenerational wealth throughout history. Those are taxes and our future generations.
We create a future generation without financial IQ and don’t pass that along and that again is what Aaron and his family are passionate about. The solution to that is legacy, but legacy means more than the dollars. The dollars can both be a gift, grace and tool to do something great with, but they can also be a weapon if you put them in the hands of somebody who doesn’t understand. There’s plenty of people in Hollywood that we can point to as examples of that. You’ve got to pass your experiences, your sense of accountability and education. I don’t want to steal all of this with my thoughts. Aaron, I’d love for you to give a little bit about your background and talk about how you’re applying this in your life.
When you put that type of power and those resources into the wrong hand, what’s interesting is the weapon gets used on the individual incorrectly. Instead of a weapon to the masses and against the activists, against themselves, you don’t realize this. The more they have that’s uneducated, they’re killing themselves with that. It’s interesting how you put that as a weapon. My background, I started in a blue-collar family. We had a cattle ranch in Utah when I was in high school. I went to the oil fields in Wyoming to run heavy equipment, working in the mine, driving a truck and all these things. Completely broke, I found myself walking the parking lot looking for change just to get enough gas to get home one day and stumbled into a guy who introduced me to my industry many years ago. This was in 1997.
Since then, I’ve been involved with working with real estate investors pretty exclusively. I’m ranked in the top 1% of my industry, the top twenty in the industry for transactions closed and it’s all focusing on real estate investments. With that focus, I was able to start developing some thought processes with my family. We started talking about the legacy and the education and all these things. I started discovering that my ability to educate myself about these concepts, about real estate investment, on the life insurance piece, on building wealth, trust and handing that off became more at least attainable for me when I was doing it for the benefit of somebody else other than myself.
How we advise our children is much greater than how we advise ourselves. You can think about all the decisions we’ve made in life, the very stupid ones. How would we advise our children in that same scenario? Probably differently because we have talked ourselves into some dumb decisions. If my kid can do it in the same scenario, I guarantee I would advise them differently. What I’m going about this as is how would I advise my children to handle a large sum of wealth? With that and having to live by my advice and in doing that is how I started developing the thought process. Thanks to you and our relationship that started with you as a client that created this foundation of wealth for us utilizing the infinite banking strategy.
You have the tools in place and like me, you’ve always wanted to figure out, how do I make sure that my experiences, my knowledge, what I’ve learned get passed to the kids? Here’s the challenge is that most people we work with are business owners. They’re successful. Maybe they’re W-2 employees, and they’re super successful in what they’re doing. We’re all type A people. We’re working super hard and we think we’re working for our family. You have a great story about how you went to mastermind after mastermind, after business meetings over the last few years to get in front of people that you can introduce concepts to and partner with.
They’re all giving pictures of their family, which is sitting next to you in your house, which is an awesome picture. It’s in your house where you’re sitting because you were able to spend some time with your kids. They always say like, “This is my why.” but we forget that doing all that stuff comes at a cost and that price is that we’re not in the room with our families. You do some special stuff in your house with your kids. Aaron, there was one of those moments, where you realized, “I need to spend some time with my kids and have these conversations with them.” Share that with the audience.
As you alluded to, I find myself in all these think tanks and everybody has an opportunity to do a presentation. Every single one of those presentations and those PowerPoints that I talk about, “Here’s my why,” and it’s a picture of their family. When I got to create my PowerPoint, I put the picture of my family but I wouldn’t say that was my why. I couldn’t honestly say that was the case. My why for being there, my why for getting up and going to the office every day is not for my family. It was to build my business and become the most well-known person in my industry. That’s what I was after. My family was my family.
I could not duplicate what they were saying. I started finding that I was leaving a legacy with my family. The legacy that I was leaving was, where’s dad going? I’ve made some of the adaptations. I’m no longer part of many of those things because every third month, I’d be out for about three weeks, bouncing all over the country trying to interact with all these business leaders. I started to find that with that legacy being left of, “Where’s dad?” I wanted a legacy being left as, “Dad, where are we going now?” That means I’m trying to bring my kids with me. They have to understand what this is all about. They have to understand what information I have.
I can’t put them in a room like that and have them sit there and try and listen to all these people go on about business because it gets old quickly if you don’t have a stake in it and they don’t. What I can share with them is, how are we going to go about their future? What I started doing is introducing them to the thought processes of what their future might be by introducing them to what it looks like for me and my wife’s reason to not be here anymore. I use the story where a man was on a flight. He and his wife are going on a business trip. He was feeling some chest pain, shortness of breath and things like that as he’s on that first leg of the journey. At his layover, they left the airport and went to a hospital to get checked out. They gave him a clean bill of health and sent him along his way.
On the next leg of his journey, on the next flight, the captain comes over the intercom and asked him to identify himself. He gets the flight attendant call button. They come and talk to them saying, “We’re about ready to land. If you’re going to hold the entire plane on, we’re going to escort you off. There is an ambulance waiting for you.” When he was escorted off, he got to the ambulance and he was taken to the hospital. Two surgeons were waiting for him. They explained he was misdiagnosed. He had a pulmonary embolism and they needed to operate. The next thing they asked or at least suggested was if there’s anything else in life you need to consider, now is the time.
I told my children that same story and asked them, “What would you do if mom and I were gone on a trip and we were facing a situation we didn’t come back?” My children all looked at me saying, “We don’t know.” It boils down to they then realized they don’t know what they don’t know. We started from the beginning. We opened up everything. Here’s our asset, our income, our debt. Here’s the things that we own. We started structuring it all out. The only thing that was being negative about that was when I showed them income, they turned to look at me and almost in unison, they’re like, “Why do we live here, dad?” I had to explain to them that I am not going to give them a different life than I had growing up.
You don’t want to deprive them of that.
I wanted them to learn what it is to get up every day and have to work for things. They were surprised by the income we make. We don’t throw it around at all. We then incorporated or developed a system where the children all get together once a month. They have to meet certain criteria. One, they have to serve on what we call the family board that will look at all our investment opportunities. We discuss them together and then we vote on them together. If there’s a single dissenting vote, we go back to the discussion about it. If we can’t get away from the dissenting vote, we don’t do the investment.
What I found with humans that if there is dissent and things don’t work out, that person’s like, “I told you so.” If it does work out, the other 4 or 5 people have, “I told you so.” Still, we can’t have it. I can’t have dissent within the group. I can’t have them at each other. What’s also interesting is in a failure scenario on either side, the investment is successful and the one who voted against it was the one that ever gets to say, “I told you so.” They’re going to defend their position. They’re not going to learn what they didn’t consider before. On the opposite side, if it fails and that person’s like, “I told you guys you shouldn’t have done that, but you did anyway and you wasted our money.” The other ones have to defend their position as to why they thought it was a good investment. There’ll be learning from it. I’m trying to take that away from it too. I’m having to make adaptations on how they’re going to contribute because there is a requirement that they must at least save 10% of their income and invest it. They can’t put it into our assets, in our trust because that commingling puts things at risk.
What there’s going to be is we’re going to have to reconcile them saving their own funds, creating their method of growth and then they can couple it with my wife and I’s trust as partners in investments. We’re working on that too. Ultimately, I want there to be the on their part to save or thought in what they’re planning to do with their lives and also, know that there’s a massive pot of gold at the end of the rainbow. When my wife and I pass, not only do we have what we saved, what we invest in, what we created and the foundation of our business if they also have the death benefit. If they continue to grow their 10% or more, and they can also do the same thing with their family, it can be multigenerational if they have assets. If they don’t, then they’re written off the will. They’re not going to have the monetary side. They’ll get the stuff I have, the cars and the other things like that, but they’re not going to get the family business assets, if you will.
If you think about what you’ve put in place there, and it’s still a work in progress but it’s going to happen, what you’ve put in place compared to what the average family is struggling with, you’ve got people who understand to save. You’re having a conversation with your children and maybe even bringing them with you on trips about finances, about what you’re doing in your life. You’re incorporating something that’s protected from the other major stealer of wealth we talked about, which is taxes. You’re using life insurance as maybe even where they store all their cash.
At the moment, like me, you’ve got policies on all family members and you’re contributing dollars to it in some manner. My kids contribute their dollars that they earned by working for me in my business. We put that into their life insurance. It’s a little snippet, a little teaser. Think about this in your family. The 2018 tassel allows us to take $12,400.19 and it goes up every year that our children can earn and they can earn that money without paying taxes on it. I would have paid the highest tax rates to earn that money. Instead, I’ve taught my children about work ethic. I’ve taught them about all things jobs. They’ve also earned money that’s theirs and we took it as tax-free money coming into our family and kept the tax-free in life insurance. That’s one of the things about how I’m doing it. It’s the same thing Aaron’s doing in his family.
You’re teaching how to save, work ethic, ideas about business, about having a job. There are some fantastic aspects of this. How do you get this started in your family? If you are far from this, a lot of the people who are reading, they’re far from this. They’re trying to figure out how to get the kids off of Xbox? I’ve been there. How to get them to do their homework? How do we get them to sit down in the living room? This isn’t The Brady Bunch after all. We don’t have this culture where we all show up at the couch on Sunday afternoons or when somebody yells. That would be pretty awesome. There are steps to get there. We do have a fantastic program at Paradigm Life, talking about these family meetings and creating this culture and this legacy in your family and your core values and how to have those conversations. We had this the series which is pretty awesome. It’s miniature step level stuff. Talk about maybe an investment. What would that look like with your family going through an investment?
What we do is, we sit down and we discuss what I know about it. If it’s real estate, you’re going to get a pro forma. We’re going to look at the market, to try and understand things about that preliminarily. I start a Zoom call and I will have whoever’s offering that opportunity join us on a Zoom call. A member of the family has an opportunity to ask questions and get directly from that person what the investment is about. They can garner for themselves whether or not they feel confident in it. I believe it’s an absolute necessity. You’ve been a subject of one of our Zoom calls before.
The necessity for my kids to see within the eyes of the individual who’s offering this and determine for themselves what they believe about the person. It’s not much to me about the investment that it is about the individual. Often people ask me, “How is this working out? How’re the investments over with this group? How is it with Gary in this paradigm?” I can’t speak to what your experience will be monetary because every person is different. I can speak to the person. I know the man and because of that individual, I know that you’re in good hands. That person is not the type that has any dial. He’s not out to take from you to benefit him. He’s out to give to you that benefits all. That’s a big difference in business. I’m hoping to also educate them on how to discern between people. Who’s a predator and who is not?
We as humans, we’re the apex predator but we’ll prey to one. We are prey to each other. If you have another predator, you’ve got to understand if they are going to keep preying upon you, you have to get away from them. I’m trying to educate them on that as well and that’s tough because that means I have to bring a predator in at some point so they can see what it looks like, to see what it acts like and they’re not there yet. The one thing I want people to understand is, and my kids will understand how to ask adult style questions about the business, the individual who I’m working with to understand how to answer questions from a child and be able to communicate on a level that they can communicate.
The other thing I want to convey is there is a special place in hell for anybody who lies to kids and tries to take from them. Those are the things that I believe are important that make them get it. The other is building relationships with people they can rely on when I’m not here. One of the things I didn’t bring up is I gave my children three phone numbers. One is my attorney, Michael Sheridan. One is Mr. Gary Pinkerton and one is a buddy of mine by the name of Cory Boatright who is a real estate entrepreneur. I give him those three numbers for them to take down that if something happens and we are not coming back, those are the three people they call. They don’t call granny, grandpa, their cousins, their friends. They call those three numbers first and set in motion. The individuals that are going to gather around them to protect them from those predators who are going to come after them while they grieve and prepare to communicate with family.
I’ve been with you when you’ve presented this concept to two groups and it’s amazing. It tugs at our heart because we all know that we’ve got some blind spots here in our family. It makes me blush and pause when you talk about it and every time I hear it. It’s an important topic and I appreciate sharing that with me and joining me. I wanted to reflect that when I did the Zoom with you, it was a bit of an uncomfortable moment but I’m sharing this funny story because it shows the power of what you’re doing. It’s late in the evening, my time on the East Coast here, and Aaron’s ten-year-old daughter texted me a question about life insurance policies.
The next morning, I was reflecting on that and I said, “Aaron, your daughter texted me this question. I thought it was cute,” but what I wanted to make sure was that I will not be going through the text and like, “What is this weirdo dude texting back to my daughter?” I thought I would share a couple of other ideas that I’ve used in my family. My sons, Jake and Ryan both have life insurance policies. They both work for me in my business. They have for a few years. They’ve also put their money from other jobs that they’re getting. They use that money for the life insurance policies for investments and college. My oldest is in college and he’s using it to help fund things for college.
An example of investment, years ago, I was already heavily into real estate and excited about it. My oldest son is an entrepreneur at heart. He said, “Dad, would you help me invest in stocks?” I said, “Sure, Jake. I would love to. Why did you choose that is what you want to go after?” He says, “I want to do real estate, but I can’t afford real estate. I’m going to do what you do.” I helped him figure out how to do that. He bought a little coffee parcel in Panama. I’ve got all ulterior motives here and he knows them so I’m not hiding any of this. What I want to do is I want to have this one-on-one trip with my son. I want my children to start to see what life outside of this privileged place that we live in America is. Even the poorest in America does not understand what’s out there in the rest of the world.
He’s also going to see the concepts of long-term growth and delayed gratification. These trees are going to take three years before he starts getting cashflow from them. I want him to be able to tell his friends and get interested in other kids, “I own something in Panama. Don’t you own land in Panama, Jake? What’s the deal with that?” That’s a great example, an opportunity. Having them buy their bicycle, their car, their Xbox or whatever it is. Buy something and then go through the conversations about how I’m borrowed against my life insurance policy to do that, my bank, and I’ve got to pay it back.
There’s this thing about opportunity costs that mom and dad keep talking about. There are all kinds of lessons there. There’s ownership. I have a buddy who had his son buy his first big boy bike when he was done with the training wheels and the old bike used to get run over and sit out in the rain. It’s always in the way in the garage, the new bikes, not because he’s got to use his errand money and all of his chores to pay for the darn thing. There are some nervous moments where they say, “Dad, what happened to the money grandma gave me for Christmas?” I’m like, “It’s in your bank.” “Can I have it?” “No, we don’t do it that way.”
One of the things that we’re doing, because I’m going to get with you about each of my children, is to pick up their life insurance policy. We have a policy on each member of the family, but that’s owned by us. That goes into real estate for the trust but they’re going to get their own. Like what Jake was doing and he was putting aside the money, we want you to give him this real estate. The gold going forward that we had been considering is for them to take and be able to borrow from their life insurance policy and be able to buy into the real estate alongside us as a partner, as having a small stake in it. They will always have that stake in that. Whatever that cashflow is, that percentage goes back to them. Whenever it sells, they get their percentage. That way, it’s not a matter of their funneling the money into us to grow this one side.
It grows both sides and they’re our partner in it. They’re at risk because they’re in it too. We’re working on incorporating some form of separating that so they can start their policies, their separate policies we already have on them. They’re not the beneficiary of the death benefit nor is there significance or their children going to be? It’s going to be the trust, but they start there and then they can couple with it the partnerships. There’s some great opportunity down the road where they get into real estate earlier because they’re participating with us and they can get more excited about it and not be stifled by, “I don’t have the capital.” Even if you have $500, you can put it in there. You get a small sliver of the ownership, but you still have a sliver of ownership.
Aaron, is there something that you think we didn’t talk about in this amazing, important family concept about multigenerational?
The thing that we haven’t covered is to get started with something. Find somebody to talk to about it. Start figuring out how you talk to your kids. Mine was sharing that story. Start educating yourself. That’s it. The bottom line is to educate yourself. Talk to those people that are trying to incorporate their own life. Be cautious of people who are looking to try and take from you so they can build up their walls. I don’t want to share analogies anymore but get started. You can’t get anywhere if you lay in the same spot all the time.
Go to AaronBChapman.com. There are some awesome books are coming out from this guy on these topics and many more important lessons learned. My friend, thank you for joining me.
Thank you. I appreciate you, brother.
Thank you, Gary and Aaron. You guys are amazing. It’s such a great episode and thanks to you all for joining us. Join us next time as we talk about how to prepare for another critical point of communication as you move forward with the Perpetual Wealth Strategy. John Stewart, a deeply experienced entrepreneur. One of our wealth strategists will be joining us to share his experiences and insights on how you can best discuss the Perpetual Wealth Strategy with your CFO, your CPA, or other financial professionals in your life. Whether you’re a business owner yourself, have a small personal finance team or a large team of specialized advisors. This will be an episode you don’t want to miss.
Be sure to visit the show’s official page at ParadigmLife.net for appropriate disclaimers and terms of service. Guest opinions are their own. If you require specific investment, financial, legal, tax, or any other specialized advice, please consult an appropriate professional or a wealth strategist at Paradigm Life. We welcome and appreciate reviews of the show. Head on over to iTunes or Stitcher to leave your review. Don’t forget to subscribe to the show to get access to every new episode and its exclusive content. Thanks again for joining us and we’ll see you next time.
Gary Pinkerton is a wealth strategist, veteran, entrepreneur, speaker, author and real estate investor. He graduated from the US Naval Academy with a BS in Mechanical Engineering, and from the University of Illinois with a MS in Nuclear Engineering followed by a career as a Navy nuclear submarine officer. His major assignments included command of the attack submarine USS TUCSON, Pentagon Division Director on the staff of the Joint Chiefs, and Ethics Instructor at the Naval Academy, retiring as a Captain after 30 years of service. Gary has extensive experience designing, owning and selling life insurance, real estate and alternative investments.
About Aaron Chapman
Aaron Chapman a veteran of the finance industry since 1997 is rated as part of the top 1% of the finance industry. Specifically #14 in 2018 by Scotsman Guide for units closed in Real Estate Finance industry wide. Highly skilled in financing for the real estate investor aiding in the analysis and structure of multiple financed properties. Represented by a team of 15, they have a well-oiled machine focused on efficiency for the investment transaction. Aaron and family practice what they preach in having investment properties in 5 states utilizing the infinite banking strategy with Paradigm Life. Please go to www.aaronbchapman.com to make contact and view his MLO licensing.
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