FlexVault Multi-Generational Wealth

Trust Structures for Lasting Legacy

Build wealth that lasts beyond your lifetime. FlexVault's tax-free death benefit, combined with strategic trust structures, creates a legacy that serves generations. Unlike inherited 401Ks (which are fully taxable and must be distributed within 10 years), FlexVault death benefits are received 100% tax-free with no forced distribution timeline.

FlexVault Multi-Generational Benefits

At a Glance

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Death Benefit Tax

$0 Income Tax

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Distribution Timeline

No Requirement

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Estate Exclusion

Via ILIT

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Creditor Protection

Strong

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Multi-Generation

Yes (Dynasty Trust)

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Control Options

Trust Terms

Why 401Ks Make Poor Legacy Vehicles

The Problem with Traditional Inheritance

You've worked hard to build your 401K. But here's what happens when you leave it to your children:

The SECURE Act Changed Everything

Before 2020, heirs could "stretch" inherited IRAs and 401Ks over their lifetimes. The SECURE Act eliminated this for most beneficiaries, requiring full distribution within 10 years.

The Tax Acceleration Problem

If your child inherits a $1 million 401K, they must withdraw it all within 10 years—and every dollar is taxable. If they're in their peak earning years (40s-50s), this inheritance could push them into the highest tax brackets.

Federal tax: 22-37%
State tax: 0-13.3% depending on state
Net inheritance: $600,000-$780,000

You saved $1 million. Your children receive $600-780K. The government takes the rest.

The Real Cost of Taxable Inheritance

FlexVault vs. Inherited 401K

Feature	Inherited 401K	FlexVault Death Benefit
Tax Treatment	Fully taxable to heirs	100% tax-FREE
Distribution Requirement	10 years (SECURE Act)	None
$1M Inheritance	~$600-700K after tax	$1,000,000
Estate Tax	Included in estate	Can be excluded (ILIT)
Creditor Protection	Limited	Strong (varies by state)
Control from Grave	None	Yes (through trust)

100%

Tax-Free to Heirs

Income Tax on Death Benefit

10 Years

SECURE Act 401K Deadline

$300K+

Potential Tax Savings on $1M

Beyond Simple Beneficiary Designation

Trust Structures for Maximum Control

While you can name individuals as beneficiaries, trust structures offer significant advantages for larger estates or complex family situations.

Irrevocable Life Insurance Trust (ILIT)

The ILIT owns your FlexVault policy instead of you. Benefits:

Estate tax exclusion: Death benefit isn't part of your taxable estate
Creditor protection: Assets in the trust are protected from beneficiaries' creditors
Distribution control: Trust terms dictate when and how beneficiaries receive funds
Divorce protection: Keeps inheritance from being divided in divorce

Dynasty Trust

For those wanting to extend benefits across multiple generations:

Death benefit stays in trust, invested for growth
Income distributed to children, grandchildren, great-grandchildren
Principal protected from estate taxes at each generation
Available in states that allow perpetual trusts

Choosing the Right Approach

Simple vs. ILIT Structure

Feature	Simple Beneficiary	ILIT Structure
Setup Complexity	Simple	Moderate
Estate Tax Benefit	None	Full exclusion
Creditor Protection	State-dependent	Strong
Distribution Control	None	Trust terms
Multi-Generation	No	Possible
Best For	Simple estates	High net worth

For estates below the federal exemption ($13.99M per person in 2025), an ILIT may not be necessary for estate tax purposes. However, the creditor protection and distribution control benefits make ILITs valuable even for smaller estates.

Building Legacy That Lasts

Multi-Generational Planning Strategies

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Policies on Children

Establish FlexVault policies on your children (you pay premiums). By the time they retire, decades of compounding creates substantial tax-free wealth.

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Grandchild Strategies

Fund policies on grandchildren with even longer time horizons. Small annual premiums can create million-dollar tax-free legacies over 50-60 years.

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Premium Financing

For large estates, premium financing allows larger policies without gift tax implications. The policy itself or other assets serve as collateral.

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Dynasty Planning

Combine FlexVault with dynasty trust structures to create perpetual family wealth that benefits generations without estate tax erosion.

What Your Heirs Actually Receive

The Death Benefit Calculation

Understanding how the death benefit works is crucial for legacy planning:

Basic Formula

Net Death Benefit = Total Death Benefit - Outstanding Loans - Accrued Interest

Example Scenario

A FlexVault client with a $2M death benefit who has taken $400K in loans with $50K accrued interest:

Total Death Benefit: $2,000,000
Outstanding Loans: ($400,000)
Accrued Interest: ($50,000)
Net to Beneficiaries: $1,550,000 (tax-free)

Strategic Balance

FlexVault's strategic guidance (Component 2) helps balance income needs during your lifetime with legacy goals. Taking too much in loans reduces the death benefit; taking too little means you didn't fully enjoy your wealth. We help find the right balance.

Building Your Legacy

Common Questions About Multi-Generational Planning

FlexVault provides a tax-free death benefit to your beneficiaries. After any policy loans are repaid, the remaining death benefit passes directly to heirs income-tax-free. This can be structured through trusts for additional control and protection.

Inherited 401Ks must be fully distributed within 10 years (SECURE Act) and are fully taxable to heirs. A $1M inherited 401K might net only $600-700K after taxes. FlexVault death benefits pass 100% tax-free—$1M is $1M.

Yes. Irrevocable Life Insurance Trusts (ILITs) can own FlexVault policies to remove the death benefit from your taxable estate. Dynasty trusts can extend benefits across multiple generations. Estate planning attorneys help structure these arrangements.

Outstanding loans are repaid from the death benefit first. The remainder passes to beneficiaries tax-free. This is why strategic guidance monitors loan-to-value ratios—to ensure substantial death benefit remains for legacy purposes.

Death benefits are income-tax-free but may be included in your taxable estate if you own the policy. Using an ILIT removes the policy from your estate entirely. For 2025, estate tax exemption is $13.99 million per person ($27.98M for married couples).

Yes. Many FlexVault clients establish policies on children or grandchildren. Started young, these policies have decades to compound, potentially creating substantial tax-free wealth for the next generation.

Explore Related Strategies

Working with Estate Planning Attorneys

Multi-generational FlexVault planning works best as part of a comprehensive estate plan. We coordinate with your estate planning attorney to ensure:

Trust structure alignment: ILIT or dynasty trust properly drafted
Ownership coordination: Policy ownership structured correctly from the start
Beneficiary optimization: Trust named properly as beneficiary
Gift tax compliance: Premium payments structured within annual exclusions
State law considerations: Trust situs in optimal jurisdiction

Don't have an estate planning attorney? We can provide referrals to attorneys experienced with life insurance trust structures.

Ready to Plan Your Multi-Generational Legacy?

In a complimentary FlexVault Strategy Session, we'll discuss how to balance your retirement income needs with your legacy goals—ensuring both you and your heirs benefit from your wealth.

Schedule Your Strategy Session Back to FlexVault Overview