From Custodial Roths to Living Trusts, here’s the New Playbook for Building a Financial Legacy
Building a life-changing net worth comes with a new question: How do you give your children financial freedom without handing them a shortcut to entitlement?
For high-earning families, generational planning isn’t about last-minute estate scrambles or outdated “trust fund baby” tropes. It’s about using modern financial tools to structure a life where kids inherit not just wealth, but wisdom, access, and resilience.
In this post, we walk through real-world strategies the 1% use to architect wealth that scales beyond a single generation. Whether you’re working toward financial independence or already there, these are the same frameworks that transform passive inheritance into long-term infrastructure.
Hiring Your Kids Through Your Business: A Tax-Smart Head Start
Have a family business or side hustle? You might be sitting on one of the most powerful (and legal) wealth transfer tools available.
If your children help with real work, social media, content creation, design, testing, or admin, you can pay them a fair wage through your LLC. Not only does this instill a strong work ethic, it also opens up tax-advantaged opportunities:
- Custodial Roth IRA: Contributions from earned income grow tax-free. A single $6,000 contribution at age 15 could be worth over $100K by retirement.
- No federal tax liability: If their total income falls below the standard deduction threshold (currently $15,000), they’ll owe nothing in federal income taxes.
- Business deduction: Their wages are deductible to your LLC, lowering your taxable income.
You’re not just hiring your child, you’re launching their financial future while lowering your own tax burden.
Trusts That Work Before You’re Gone
Trusts aren’t just for the ultra-wealthy, and they don’t have to wait until you’re gone to be useful.
High earners are proactively transferring appreciating assets now, while valuations are low and tax laws are favorable. Two trust strategies to know:
- GRAT (Grantor Retained Annuity Trust): Transfer growth assets like startup shares into a GRAT. Any upside above a low IRS hurdle rate passes to your heirs, tax-free. You still receive payments during the trust’s term.
- SLAT (Spousal Lifetime Access Trust): Transfer assets out of your estate while retaining access via your spouse. Especially powerful if lifetime exemptions shrink after 2025.
Want even more efficiency? Establish these trusts in tax-friendly jurisdictions like South Dakota or Nevada for enhanced asset protection and zero state estate taxes.
You don’t need a $50M estate to benefit. These tools start to make a serious impact with just $2M+ in appreciating assets.
Education Planning Beyond the 529
The 529 Plan is a solid baseline, but for families with higher incomes, there are smarter ways to fund education and reduce taxes.
Here’s a real-world blueprint:
- Roth IRA for teens: If your child earns legitimate income (via work, internships, or your LLC), they can contribute up to $7,000 annually. Growth is tax-free, and qualified withdrawals (first home, education) avoid penalties.
- Minor-held brokerage account: Capital gains here are taxed at the child’s rate, often 0% to 10%, instead of the parents’ 24% to 37%.
This dual strategy funds their future while teaching them about investing and smart tax planning, long before they need to make high-stakes financial decisions.
How High-Income Parents Set Their Kids Up for Life
Watch: How to Secure Your Child’s Financial Future (Without Sacrificing Your Own)
This short video walks through how business owners and professionals can hire their children, use Roth IRAs to build long-term wealth, and use trust strategies to unlock lifetime advantages.
Making Sense of Building a Future for Your Children
At the core of all this? The best inheritance isn’t a windfall. It’s a framework.
One that:
- Transfers appreciating assets with minimal tax drag
- Instills financial literacy before adulthood
- Provides breathing room without promoting entitlement
- Builds systems that continue compounding wealth, generation after generation
The biggest difference between families who preserve wealth and those who lose it in one generation isn’t income, it’s structure and intention.
Smart planning means starting before the valuations spike. It means aligning educational funding with tax strategy. It means giving your kids a head start, not a handout.
Treat your children like the future entrepreneurs, investors, and leaders they can become. That starts with a framework, not a fortune.