Weekly Love Letter 22/08/25 - Become Your Own Family Bank
When your kids or grandkids need a large sum of money, for a down payment on a home, seed money
for a business, or capital for a major life move, most people think they have three choices:
Do nothing: “I figured it out, so they should too.
”Give them the money outright: “We have it, so why not?”
Send them to a traditional bank: “It’ll build their credit and teach them the system.”
But the wealthiest families know a fourth — and far more powerful — option.
And, it’s not just for the super rich. It’s very likely you and your parents or grandparents or kids could use this strategy yourselves.
This is Life & Legacy Secret #2: Become Your Own Family Bank
Smart parents don’t just give their kids money, nor do they make them “struggle just like we had to” in order to learn.
Instead, they create a formal Family Bank and lend it — at interest — in a way that strengthens the whole family wealth ecosystem.
This isn’t about being stingy. Or over-giving.
Nor is it just for the uber rich.
It’s about being strategic and empowering and preparing the next generation, building upon the lessons learned already by the family.
This is part of the evolutionary process.
I promise to share more on that next week.
Oh, and no, it’s not just for the super rich either.
If you’ve got thoughts, comments or questions about the “make em struggle” mindset that either you or your parents have, hit reply and talk to me about it, so I can incorporate your thoughts into next week’s newsletter.
So, What’s a Family Bank and How Does it Work?
One way is to set up a loan between family members, using all of the formalities of traditional lending:
A promissory note
A repayment schedule
An agreed upon interest rate (charge at least the minimum federal rate, currently around 3.5%, but look it up at the time that you set the rate so that the loan doesn’t become a gift, which requires reporting)
The most sophisticated families don’t make these loans directly.
Instead, they set up an Irrevocable Trust — sometimes referred to as a “Family Office” trust — and the Family Office trust becomes the actual lender.
How it works:
Parent or grandparent creates and funds the irrevocable Family Office trust.
An independent trustee manages it and makes loans or distributions.
The family member in need “applies” to the trust, just like they would to a bank.
A family charter or directive guides the trustee on the types of loans to approve.
Why this works so well:
Keeps Wealth in the Family – Interest payments stay inside the family’s wealth pool, not in a bank’s pockets.
Teaches Real Financial Skills – Junior generations learn to ask for what they need without shame or guilt, and learn responsibility through formal repayment.
Better Loan Terms – You can set the interest at the IRS Applicable Federal Rate (AFR), usually far lower than bank rates.
Tax-Efficient Wealth Transfer – Structured properly, these loans can shift economic value without triggering gift tax.
Reduces Family Drama – With an independent trustee making decisions based on clear guidelines, emotions and favoritism stay out of the process.
Flexible Yet Structured – The trust can adapt loan terms to fit circumstances, without losing its legal and strategic backbone.
This strategy transforms generosity into a self-sustaining financial engine for your family — one that grows wealth, instills values, and builds a legacy of responsibility and opportunity.
Your Question, Answered
My Dear friend Chris asked:
“When planning for end-of-life, what are the advantages of a trust over a will, and what kind of trust? Also, why is it a good idea to create a trust for your child?”
Response:
Chris, thanks for asking! I love that you are considering estate planning for your child. It's critically important. And, I'm hosting a live webinar training next week on this topic.
If you'd love to join in, hit reply and I'll get you a link.
And, here's my short answer:
A will only takes effect after you die, and means the people you love are stuck in a court process called probate. It’s public, expensive, slow and totally avoidable by those who take action before incapacity or death.
A trust works while you’re alive and after you’re gone, keeps affairs private, avoids probate, and lets you set rules for how assets are used.
A trust for your child ensures their inheritance supports them responsibly — not with a lump sum that could do more harm than good, and can even provide a lifetime of asset protection, protecting family assets from future divorce or lawsuit.
This ties directly to the Family Bank idea: both are about building wealth with wisdom and structure, while teaching the next generation stewardship.
Your Action Step
Consider:
What major financial goals will your children or grandchildren have in the next 5–20 years?
How could a formal, low-interest loan help them reach those goals more effectively than a gift, a bank loan or having to struggle for it?
What lessons about money and responsibility do you most want to pass on?
Your answers are the foundation for your own Family Bank.
And I’d love to hear from you:
👉 What questions do you have about setting up or running a Family Bank? Reply and let me know — I may feature your question in an upcoming issue.
Coming Next Week …
We’ll bust the myth that “kids need to struggle to learn.”
Many parents believe it, but wealthy families know a better way.
If you’ve got questions or thoughts on this — about struggle, resilience, or how to prepare your kids for wealth — reply and share them with me.
One More Thing … A Life-Changing Invitation
In just two weeks, I’ll be co-hosting Living Brave Live with my dear friend Shoshana Raven.
This isn’t just another event — it could change your life. If you’ve been feeling the call to live more bravely, more aligned, and more fully expressed, this is your moment.
👉 Tickets are still available at a discounted rate until August 24
I have a couple more tickets I bought for my team that I'm not using.
Hit reply if you are getting this after the discount has expired and want one of them.
I would love to see you there.
To your eyes wide open life,
Ali Katz
P.S. Your questions fuel this love letter. What’s your burning question about Family Banks, trusts, or the myth of struggle? Hit reply — I’d love to feature your voice in an upcoming issue.
