The Rockefeller Method for Protecting, Growing, and Passing on Wealth
The Rockefeller Method is a comprehensive financial system for building and passing on legacy wealth. It’s modelled, obviously, by the Rockefeller family.
The Rockefeller Method ensures your financial legacy lasts, whether you leave $1 million or $100 million. This method helps you pass on wealth, values, opportunities, and empowerment to future generations.
The term “Rockefeller Method” was coined by Garrett Gunderson and Vault AIS founder Michael Isom in our bestselling book, What Would the Rockefellers Do?
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John D. Rockefeller founded Standard Oil in 1870. He ended up becoming the richest man in American history. At his death in 1937, his fortune was estimated at more than $1.5 billion, equivalent to $300 to $400 billion today.
But an even greater accomplishment is how the Rockefeller family has preserved the family fortune after John’s death.
Six generations later, a Family Office still manages the Rockefeller fortune, now estimated at over $10 billion. About two hundred Rockefellers receive interest income from the family trusts and donate up to $50 million annually to charity.
Here’s how they’ve accomplished this:
The Family Legacy Rings and the Rockefeller Method
The Rockefeller Method of wealth planning works regardless of the amount of wealth left behind. The Family Legacy Rings consist of:
- Family Office
- Family Retreat
- Family Constitution
When you use the Rockefeller Method, you stack the odds in your favor to create a legacy that lasts.
The Family Office
The Rockefellers had a dedicated team of financial professionals—attorneys, accountants, investment advisors, risk managers—working solely for their family. It would require $300 million or more in net worth to justify such a dedicated team.
Today, you can use a fractional or virtual Family Office to provide comprehensive financial services for your family.
It’s critical that every member of your Family Office shares the same philosophy and works on your behalf. Managing your finances in silos creates risk, leaks money, and perpetuates a lack of coordination—and potentially even conflict.
The Family Retreat
Building intimate, trusting relationships within your family requires intention, structure, conversation, and living by example. Having regular meetings with agendas, identifying family rules, and creating rituals are all essential to perpetuate non-monetary aspects of legacy.
Recurring meetings and retreats allow for a transfer of philosophy and further creation of family traditions, rituals, and insights.
The Family Constitution
Your Family Constitution is an extended family mission statement that will help govern their decisions and make sure the money is put to good use.
Through proper incentive-based planning, a board of trustees, and an articulated philosophy, your heirs can benefit when they are wise stewards of the resources provided.
The Family Constitution allows for more dynamic management in an ever-changing, unpredictable future. It is governed by principles, values, and frameworks to inform decisions that will impact heirs. It gives enough structure, but not so much detail that it may be rendered irrelevant by technological advances and change.
The Rockefeller Method Preserves Your Legacy Through Generations
The Family Legacy Rings, with the Rockefeller Method at the center, keep wealth centralized and directed by a carefully planned trust.
This includes owning optimally funded whole life insurance contracts on family members for asset protection and to empower heirs for generations.
If you have a trust, you can keep your assets private, avoid probate, minimize tax, and have provisions that “keep the money together”—and the family.
If your assets go through probate, the court will make the choice, not you. And it will be public knowledge; all that you have or do not have will be on display. With a trust, you can “own nothing, control everything”: a core mantra of the Rockefeller family.
You can make it so your heirs don’t have to start over at zero with every generation. Instead, they can leverage your legacy to support their passion and purpose.
For example, if your descendants have a business idea, you may want to empower them to start that business with the family trust. You may want to help your kids pay for their education so they aren’t shackled with debt. You may want to empower them to make a bigger impact in the lives of others by encouraging them to make choices aligned with their purpose and with value creation in mind.
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How Whole Life Insurance Fuels the Rockefeller Method
With the Rockefeller Method, as soon as a beneficiary of your trust is born, the trust takes out a whole life policy for them and for the maximum amount of insurance the company will offer. That way, if an heir borrows money from the trust but isn’t able to pay it back, it’s not detrimental to the survival of the trust.
It is also important to have a death benefit to replenish funds in case tax fluctuations, inflation, or economic turmoil create losses within the trust.
There can be safeguards, such as restrictions on how much an heir can borrow. This ensures that if they are unable to pay it back in full, the trust will be made whole again by the life insurance.
And when an heir does pay back a loan, the interest is NOT paid to the government or a banking institution. Rather, it is put back into the family trust, keeping the family strong.
You can set up a Rockefeller Method trust like this for experiences, entrepreneurship, and any number of enterprises. You can structure it so that people can only borrow a certain amount or even a specific number of times, depending on the assets in the trust.
The board you set up can use your Family Constitution to make decisions for the trust. The board is a group of people you select that will best represent you in case of death. The board can help educate, mentor, and support the family while also protecting your wealth.
Design Your Rockefeller Method Plan Properly
The Rockefeller Method involves more than simply buying a whole life insurance policy. It requires a comprehensive, coordinated plan and a properly structured whole life policy.
Your whole life policy must be designed properly, and not all policies or companies are created equal.
Insure Your Full Human Life Value
To make optimally funded whole life break even on cash flow as quickly as possible, you get a low amount of insurance coverage and then overfund your policy as much as you can.
However, fully protecting your human life value with the proper amount of death benefit is a top priority. It locks in opportunities for conversion and increasing your optimally funded whole life in the future.
Before you even consider optimally funded whole life, though, maximize your insurance protection.
“Human life value” is a term used by life insurance companies to mean your total insurable value based on your earning history and potential. But it also includes your character, health, knowledge, experiences, education, judgment, initiative, and ability to produce value for others.
Protect your human life value through maximization of coverage first. All other considerations come second in the Rockefeller Method.
Optimally Fund Your Policy
One critical key of the Rockefeller Method is to fund your whole life policy(ies) in the most advantageous way. This way, you can use the living benefits of your policy as quickly as possible.
Some people call this “overfunded whole life insurance.” We prefer to call it “optimally funded.” This means to add extra money to your policy than your premiums require. These additional premium dollars are called “paid-up additions.”
This money supports the growth of the policy so that your internal rate of return is accelerated in the early years of the policy. This way, you don’t have to wait ten or twelve years (or longer) to see a positive yield on your money.
This not only increases your cash value more quickly; it also increases your death benefit.
There are limits on how much you can fund your policy, and if it is done incorrectly, it can negate the tax benefits.
Choosing the Right Insurance Company
To implement the Rockefeller Method and set up your properly structured, optimally funded whole life insurance, you must pick a company with which to purchase your policy.
First, understand that there are two types: stock life insurance and mutual life insurance companies. Stock life insurance companies trade on the stock market, just like any other public company.
Mutual life insurance companies, on the other hand, do not trade on the stock market. There isn’t a stock to buy or you can’t own them in a fund inside of your whole life policy because they have no shares.
For many reasons, we prefer a participating mutual insurance company for implementing the Rockefeller Method.
Stock life insurance companies want to give their stockholders higher returns on their investments, or split dividends between stockholders and policyholders.
In participating mutual life insurance companies, on the other hand, policyholders are owners, not stockholders. Profits are not split with any outside shareholders. While they still generate profits, stability and safety are the ultimate goals—and all the profits go to the owners, the policyholders.
These are the factors we consider when choosing a company for your Rockefeller Method policy(ies):
- A Ratings: The company must have A ratings across the board, with Moody’s, A.M. Best, Standard & Poor’s, etc. Choose a top ten participating mutual insurance company.
- 100+ Years Old: Look for companies that have been around for at least a century.
- Solid Dividend History: Make sure the company has paid dividends every year, including during world wars, recessions, depressions, etc.
- Loan Provisions: Make sure that there is a fixed interest rate option.
- Convertible: Make sure that the company’s term insurance rates are competitive and convertible to whole life.
- High Early Cash Value: Make sure that your policy can be designed to allow for a high cash value as quickly as possible.
- No Barriers for Overfunding: Make sure that there are minimal fees, expenses, or other obstacles standing in the way of easily overfunding or overpaying your policy.
There are only a few participating mutual life insurance companies that fulfill all of these requirements.
To effectively apply the Rockefeller Method and maximize its benefits, you must design your plan and structure your insurance properly.
A poorly designed plan and policy will at best fail to deliver benefits. At worst, it can erode your long-term wealth.
For more details on the Rockefeller Method, get your free hardcover copy of What Would the Rockefellers Do?