4 Secrets for Making Your Kids Rich with "Law Mother" Pamela Maass Garrett

I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some Money Rehab.
Hi, Money Rehabbers. It's Pamela Moscarra.
You may know me as Law Mother. I'm going to be guest hosting this week while Nicole is on maternity leave.
This week, I'm here to tell you about what I do best, how to protect and grow wealth. You might remember me from my guest spot on Money Rehab.
I was one of Nicole's last recordings before she had her daughter. And in that episode, I spilled all the secrets on how to protect her assets.
But this week, we're going to go even deeper into the crossroads of wealth and the law. And I'm going to bring you my insights from my work, plus real raw conversations with thought leaders and celebrities who've lived through all kinds of legal and financial storms like divorce.
Now, Nicole wanted me to have this conversation with you because after losing her home in the LA fires, she knows how crucial it is to hope for the

best but plan for the worst. And that's exactly what we're going to do this week.
But first, I

wanted to kick off my episode this week solo so I can tell you a little bit more about me and why I

do the work that I do. But this episode isn't all about me.
It's actually mostly about you and your

kids. Today, I'm going to be sharing four secrets to make the kids in your life rich, even if

you can only start small.

And if you don't have kids, stick around anyway.

This could be for your nephew, goddad, or your bestie with a kid on the way or even

your future self.

So let's rewind.

I didn't grow up with a trust fund.

My mom was a teacher, my dad an engineer, and I was taught you have to work hard for money. In high school, I took a law class and I also watched way too much Law & Order.
And in high school, I told my family I wanted to be a lawyer and they weren't thrilled. I was hooked, but they had had bad experiences with lawyers.
They didn't trust them. And my dad encouraged me, though.
He suggested, though, I follow in his footsteps and study engineering first and then go to law school. So that's what I did.
But even after I explored engineering, I was still hooked on all things law. So after law school, I started my career as a prosecutor, and that's where I saw

what happens when families don't have a plan. I handled cases where parents died suddenly,

leaving their kids caught in court battles, or worse, their kids ending up in foster care.

And I saw siblings fight over money, children losing everything, families torn apart simply

because no one had put the right protections in place. And that's when it really hit me.

Most of the law, the more I understood the tools the rich use to protect their assets are actually available to everyone. And I started using them myself with my clients to build generational wealth.
And now I want to share them with you listening. So most parents think they need thousands of dollars to invest for their kids.
But what if I told you that you only need $100 a month, and that's less than most people spend on coffee, to turn your kids into millionaires 100% tax-free? So let's break it down, and I want to start with the problem first. Every parent wants their kids to have a strong financial future, but most feel overwhelmed.
Many assume they need large amounts of money to start investing, so they never do anything. And the truth is even small investments, if done the right way, can turn into millions over time.
And if you put the money in the right accounts, your kids can keep every penny tax-free. So for example, a mom friend of mine called me recently and said, I want to invest for my kids, but I just don't have thousands of dollars laying around.
And she assumed investing was only for the wealthy, so she just never got started. I asked her, can you afford $100 a month? And she said she could.
What she didn't realize is that she had started investing $100 a month into the right account, it could turn over to a million. When I showed her the math, she was shocked.
The biggest mistake parents make, thinking they need a lot of money to start investing. And the truth is, time matters more than the amount you invest.
The earlier you start, the more you can take advantage of compound interest, where your money makes money on top of money. And if you wait, you lose hundreds of thousands of dollars in potential growth.
So that's a problem. Let's dive into those solutions and go into secrets to make your kids rich.
So secret number one is a brokerage account. And a brokerage account allows you to invest in stocks and index funds for your child while they are still young.
And the best part is you can open them in five minutes on Public, Merrill, Fidelity, Vanguard. There are so many options.
But opening a brokerage account is just the first step. You need to actually make investments.
Now, I personally invest in low-cost index funds like VOO, and VOO tracks that S&P 500. This means your child's money is invested in the 500 largest companies in America.
So what exactly is a low-cost index fund? It's a diversified investment that spreads money across hundreds of stocks, and it has low fees, meaning more of your money stays invested instead of going to fund managers. Now, historically, the S&P 500 has returned about 8% to 10% per year, which is way more than a savings account.
The average savings account in the U.S. right now is returning less than 1%.
So let me give you an example. If you invest $100 per month from birth, at the time your child turns 21, that could be over $80,000.
And if you don't contribute anymore and they just leave it invested, at retirement, it will be worth over $2 million. So should you set up a custodial brokerage account or a regular brokerage account? And the difference here is a custodial brokerage account, you're opening with your child's social security number, it's their money.
A brokerage account in your name is actually under your social security number. So this is where people often get blindsided.
And I want to give you an example. A client I worked with a few years ago got blindsided because she set up custodial brokerage accounts for her boys.
She put a lot of money in it. So at the time she called me, it was worth over 300,000 and she didn't realize her kids were going to have full access at age 18.
And understandably, her sons didn't have the life lessons to really know how to responsibly use that money. So that is the downside of custodial brokerage accounts.
It is your child's money, and it has an age of majority provision, which means they have full control at age 18. So this is why for many, it's better to just set up a brokerage account in your own social security number and just earmark that money for your kids.
Now, the downside of this is if you end up selling stocks, this will go on your tax return, not your children's. So it will be at a higher tax rate.
But for many people, that trade-off is worth it. They want to keep control of that and give it to their kids when they feel like their kids are financially ready.
Secret number two is a 529 plan, and this is the best way to save for college, and it has huge tax benefits. So what exactly is a 529 plan? Well, it's a college savings vehicle that allows you to invest money tax-free as long as the funds are used for educational expenses, with some exceptions I'll get to here in a moment.
So why is it great? Well, the money grows tax-free and that's a huge advantage over regular savings accounts and traditional brokerage accounts. And you can use it for college, trade schools, and in some states, private K-12 tuition.
Now, some states also offer a tax deduction for the contributions you put in. And the biggest question I get is, well, what if my kids actually don't go to college? And in that case, you can roll it over to other family members and even yourself.
And thanks to recent legal changes, you can even roll $35,000 into a Roth IRA retirement account. So for example, if you invest $100,000 per month from birth, your child could have $50,000 to $60,000 by the time they turn 18.
And they can also leave it in there. So this is best for parents who are sure they want to save for college or a trade school.
Let's get into secret number three, a custodial Roth IRA. And this is a tax-free millionaire strategy.
Plus it gives you a business tax hack if you're a business owner. So if your child earns income, and that could be from a job, a side hustle, or you can employ them working for your business, then they can open, you can open up for them a custodial Roth IRA.
Some people call this a Roth IRA for kids. So why is it great? Well, the money grows tax-free.
The earlier they start, the more they can take advantage of this compound interest, and they can withdraw contributions anytime for college, a home, or emergencies. There is a contribution limit each year.
In 2025, you could put in a max of $7,000 per year for those who are under 50. So for example, if your child invested $100 a month from age 12 to 18, that money could grow to over a million by retirement, and that's tax-free.
So I want to share with you my personal story here and how I use my business to fund my kids' future. So I've hired my children in my business, and they do promotional marketing videos for me.
My kids are one in four, so that means I show them in videos and photos, and then I pay them as a 1099. And the IRS allows my children and anyone else to earn up to 14,000 and not have to file their own tax return.
And then their earnings go into a custodial Roth IRA. And there is a contribution limit to remind you, I can only put up to 7,000 a year into each of their IRAs.
But once I put it in there, it's going to grow tax-free for life. Now, if you are concerned about your children's privacy and maybe you're a business owner, but you don't want to share photos and videos of your kids on your social media or in your marketing materials, you can always use photos and videos that don't show their faces.
Or you could have them do behind-the-scenes tasks if your children are a little bit older, like filing or greeting at events.

So this strategy is best for people who are business owners and want to legally shift income to their kids while also setting them up for wealth and for parents who have teenagers working a job.

And lastly, secret number four, a trust, the secret to generational wealth. So what is a trust? Well, it's a legal structure that allows you to pass down assets like real estate, investments, and life insurance without going through probate.
And there are two main types of trusts, a revocable living trust and an irrevocable trust. And for the purpose of this secret, I'm talking about a revocable living trust.
For 99% of Americans, that's the type of trust they're going to use. Revocable, meaning you can change it throughout the rest of your life.
Living, meaning you've set it up in life. Now for high net worth individuals, sometimes you'll also set up an irrevocable trust.
These are trusts you don't change. And these are trusts that you're typically giving up control for other types of benefits.
So why is a trust a great strategy? Why does avoiding probate matter? Well, probate can take from nine months to two years and cost thousands in legal fees. On average, 5% to 9% of the value of the estate.
A trust avoids probate, meaning your kids get their inheritance faster and with fewer costs. Your children also get a step up in basis on any real estate you pass through a trust, which reduces or eliminates capital gains tax when they sell the assets they inherit.
So I want to share with you a real life example. A mom called my office a few years ago after adding her kids to the title of her house.
She made them co-owners thinking this would pass her home in the right way. And years later, she called my office because she wanted to remove her daughter from title.
They had had a falling out, but the daughter refused. But worse, because the kids were co-owners, they now have a capital gains tax issue on the $350,000 in gain when they go to sell the house.
So if she had put her house in a trust instead, her kids would have inherited tax-free and received a step-up in basis, meaning they wouldn't owe capital gains taxes. So a trust is really best for parents who want to make it smooth and easy for their kids after they pass away.

And for parents who want to protect their assets, avoid probate, and pass down wealth tax efficiently. And there you have it, money rehabbers.
Before we wrap up, I've got two incredible free gifts for you. First, I want to send you a free copy of my best-selling book, Legally Ever After, Your Guide to Securing Your Future and Protecting What Matters Most.
And that's not all. We're launching something huge in May, an exclusive new app designed to make growing and protecting your wealth even easier than ever.
As a listener, you have the chance to join our insider beta group and get early access before anyone else. So claim your free book and beta invite now by heading to lawmotherco.com forward slash money rehab or clicking the link in the show notes.
Stick with me this week for even more game-changing money tips to help you build your best, wealthiest life. And if you don't want to wait for the next episode, let's connect.
Find me on Instagram at lawmotherco and let's make wealth happen together. You know what I say about financial progress? Every step, even baby steps, get you closer to the finish line of your financial goals.
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Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoie.

Our researcher is Emily Holmes.

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And let's be honest, we all do.

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And lastly, thank you. No, seriously, thank you.

Thank you for listening and for investing in yourself, which is the most important investment you can make.