How to Create Generational Wealth with Lower Taxes

We often ask our clients, “What’s next?” 

Beyond the idea of how to accumulate more wealth is knowing the end purpose of it all. What happens after you’ve amassed all this money and are no longer around? What is your legacy going to be?

Your answer to these questions can help direct your actions now. 

Don’t miss out on the premier event where high net-worth investors and entrepreneurs come together to explore topics such as growing wealth, second citizenship, legal offshore tax planning, and international investments at Nomad Capitalist Live. Reserve your spot on the 2024 waitlist today. 

Planning Your Financial Future

To illustrate this concept, we want to share with you the story of a young gentleman who came to us. He’s only 25 years old but has an increasingly successful business. He realized that he could create generational wealth by going overseas and keeping more of his money. Incredible amounts of it, too.

It’s easier to create a legacy like that when you’re younger, but anyone can do this.

This example highlights the importance of considering your end goals and how to achieve them by saving money and paying lower taxes.

Then, we’ll explain why creating generational wealth is essential, and we’ll run through some of the numbers we discussed with this gentleman and talk about the ways of building wealth and creating a legacy of generational wealth.

What Are Your End Goals?

The first point to consider is where you want your money to take you. Really flesh out what it is you want, and then you can determine the steps to get you there.

Financial education for yourself and your children will enable you to make wise decisions about how to go about saving more of your money and how to keep more of it through the generations.

In order to create your legacy of generational wealth, you’ll need to know the direction you’re going so that you can put yourself in a place where you are in control of where your money goes. This does not happen without financial education.

For this gentleman in our example, at 25 years old, his end goals were around his future family. He would like to eventually get married and have a family. He felt the years ahead of him were an opportunity to save as much money as possible now to not always be at work when he starts a family. 

He grew up in a middle-class background, and his parents couldn’t facilitate that for him as they were always working. He would like to be present while also being able to support both his parents and children.

Building a Financial Legacy

Ultimately, he wants to be a good father, save money to build family wealth, and maybe even share with some causes he cares about. 

Your goals may look slightly different, but the process will be similar. Decide what your end goals are and then flesh out the details.

The important thing to consider is that without proper planning and education, much of your savings and wealth can go to the government in gift and estate taxes or be lost in unwise decisions. Educate yourself and your children on the best ways to save and keep money through future generations to build wealth.

Do you have a real estate plan? A common real estate investment strategy is to build a real estate portfolio one house at a time. Do you think that will get you to the financial future you want and the financial legacy you want to leave behind?

How to Save Money to Get to Your End Goals

At age 25, the gentleman in our story has passed the threshold of making over $1 million a year, putting him in a whole different league.

He quickly discovered how much money he was giving away in taxes from where he lived in Idaho, USA. Idaho is a moderate tax state, but he was also paying very high tax levels to the federal government, as well as Social Security and Medicare. For him, this added to about $35,000 in monthly taxes. 

He filed his quarterly estimate, which was about $105,000 every quarter. He felt he was not in control of where his money was going. 

There’s a better way to handle your money so that you’re keeping more of it.

How to Build Wealth

There are basically two paths you could take.  

First, you can stay in the United States and keep paying over $400,000 in taxes a year. 

Certainly, you can live in Idaho or anywhere in the world with a great standard of living for $700,000 a year, but you’re going to be spending, not saving, more of that money.

We often warn people that staying in the US often leads to getting caught up in keeping up with the Joneses. You’re surrounded by people you know, family, and friends who are going to convince you that since you have the money, why not get the next big car or the more expensive house?

Why Is Generational Wealth Important?

For the second story, let’s say our gentleman moves overseas and goes fully offshore. He can reduce his tax rates pretty close to zero and keep more of his money to build generational wealth.

Let’s just say he keeps living on $700,000, though, most likely, he’ll live on less than that and still have a very luxurious lifestyle.

Overseas, he can take that $35,000 a month that he paid in taxes and invest it rather conservatively. Let’s say he makes 5% on that money. 

Ten years go by, and now he’s 35 years old. 

He’s probably married now and maybe has a child. With his $35,000 a month, he’s not going to make a fortune, but he’ll have about $4.2 million after ten years. Obviously, this works no matter your age, but it’s impressive when you’re 35.

The next thing to consider is what he’ll do with the business in 10 years. He said he would possibly sell it. So let’s say he sells it for $10 million. Depending on where capital gains tax rates go, he could save anywhere from $2 – $4 million by fully going overseas.

So he would have $4.2 million from investments and $3 million or so from selling his company. That’s $7.2 million that he’s saved just from going overseas. 

How To Create And Build Generational Wealth

In our second story, we now have a young gentleman, 35 years old, and he has saved $8.5 million from moving overseas. That in itself is substantial savings he can pass on to his children. 

But let’s take it further and see how he can build on that generational wealth. Now, he can invest the money he’s saved.

From 35 to age 65, the next 30 years before he retires, if he invests that conservatively at 5%, by age 65, he’ll have close to $34 million. That’s a pretty good legacy.

What Else Can You Do?

If he gets a higher rate of return, maybe 7%, then he’ll be somewhere in the $50 million range. If he invests it in something more aggressive, like cryptocurrency, he may get 10-12% returns. 

Then you’re talking about serious multi-millionaire status and generational wealth that can last forever. He’s still living on $700,000 a month, by the way. Creating and building generational wealth in this second story isn’t done by scrimping—it’s done by taking you and your business, hopefully, eventually a family business, where you’re treated best. 

And if he doesn’t want to work after 35, then in the ten years before, he can easily set aside some of that money in a separate account for the 35-65 years. Or he could run a smaller business during that time.

He’ll have all the options in front of him for both his personal living and a plan to be able to build that generational wealth because he saved money by going overseas and invested what he would have spent in taxes.

This also doesn’t even assume that the business will get any bigger. He’s still in the building phase of his business, and we think he’ll do even better when he’s able to keep more of his money. Keeping more of your money adds motivation, so it’s very possible that your business will grow. 

So he’s worked from age 25-35 during those ten key years where he accumulated income, saved it conservatively, and then he can retire and just push that money forward for the rest of his life.

For those ten years, he might live in a place like Dubai, Singapore, or Panama City. He could even just travel around the world. He can do it in many different ways, but the key is to use those ten years to get out from paying 40% in taxes and saving that money in a way that leads to a generational wealth legacy that he can pass on.

We’re talking about potentially having $100 million simply by moving out of Idaho and going to a place where his business is treated better, and he can keep most of his money. 

The Legacy Of Building Generational Wealth

Getting out from under a significant tax burden will enable you to build generational wealth that will give you all the options you want.

This will depend on those end goals we talked about in the beginning. The gentleman in our story he’ll easily be able to provide for his parents and children while also having the ability to slow down at work and be present for his family while building generational wealth for them. 

You’ll have the ability to decide what you want to leave for your children and what to give to causes near and dear to your heart.

You have the freedom to choose what you want to do. Compound interest is so powerful, especially when you’re young. When you take a tax rate from 40% down to 0%, 2%, or 5%, it’s pretty powerful, no matter how old you are.

Go Where You Are Treated Best

Forget being able to reinvest that money, forget buying houses to develop your offshore strategy, forget all the stuff that we normally talk about here at Nomad Capitalist. Start with lowering your taxes.

You can set up trusts and foundations that do charitable work. You’ll be able to decide how you want your generational wealth managed. 

Our founder, Andrew Henderson, grew up in a successful family, but when he turned 18, his parents said they weren’t giving him anything. They helped him out with college because they had saved some money, but he wasn’t given loans, didn’t invest in his company, and didn’t provide any inheritances. This made him a stronger entrepreneur.

Carefully plan how much and when to give your children money. Many people want their families to have advantages that they didn’t have. Building generational wealth will enable you to decide the best way to help your family.

Your legacy can live on for generations. 

Consider the power of trading your high-tax country for so many other places in the world in order to have $40, $60, or $100 million to give. You’ll be able to do whatever you want with it. 

You can leave whatever legacy you want. You’ll have options that you wouldn’t have had as readily by just staying put. 

Beyond all the immediate results of having an extra $420,000 saved from taxes a year, that’s something that we think can inspire you. It’s definitely something to consider.

Don’t put it off any longer. Start building generational wealth today by going where you’re treated best. From billionaires and celebrities to everyday entrepreneurs, we’ve helped over 1,500 clients create their holistic offshore strategies to grow wealth, and we can help you do the same. Apply to become a Nomad Capitalist client today.