Sanford Schmidt Unlocks The Untapped Power Of Life Insurance In Wealth Preservation
by Arnab Dey Insurance 24 May 2025
For most people, life insurance is just a necessary checkbox on a long list of financial planning tools—something to protect a family in case of the unexpected. But for Sanford Schmidt, founder of Schmidt Financial Group, that view is both incomplete and limiting.
In a world where wealth management grows increasingly complex, Schmidt sees life insurance not just as protection but as a high-performance, multi-dimensional asset class with the power to transform generational wealth.
In a recent in-depth conversation on a financial planning podcast, Sanford Schmidt laid out the often-overlooked truths about life insurance, its potential as a tax-mitigating powerhouse, and why so few people, even those with significant wealth, fully understand what it can do.
From Public Accounting To Wealth Preservation Architect
Schmidt’s journey began in the world of public accounting, working for what was then the 16th-largest CPA firm in Chicago. But it wasn’t long before he realized his passion wasn’t in compliance work or tax filing—it was in helping high-income clients proactively reduce their tax exposure through strategic planning.
“I kept seeing W-2s for $400,000 or $500,000, and I thought, ‘There’s got to be a better way to help these people than just doing their 1040s,’” Schmidt recalls. That realization led to the founding of Schmidt Financial Group in 1983 and a career devoted to building highly customized insurance portfolios as a central part of estate and financial planning.
Longevity, Legislation, And Liquidity
Today’s financial landscape is shaped by two key realities, Schmidt explains: people are living longer, and the tax code continues to evolve.
Advances in medicine have increased life expectancy, which has had a surprising effect: the cost of life insurance has gone down. For those in their 50s and 60s, large policies are now more affordable than ever.
Legislation, meanwhile, continues to shift the way wealthy individuals approach tax planning. High-net-worth families now rely on insurance not just to protect income or provide liquidity, but to strategically reduce estate and income tax exposure.
“Life insurance is now used as a wealth preservation tool,” says Sanford Schmidt. “It’s about replacing what would otherwise go to the government with a benefit that supports your family or your philanthropic vision.”
An Asset Class Hiding In Plain Sight
Schmidt emphasizes a key message: life insurance isn’t a one-trick pony. It’s a sophisticated, customizable financial tool that can adapt to the needs of each client’s balance sheet.
Whether you’re an entrepreneur with an illiquid business, a retiree concerned about estate taxes, or a philanthropist looking to leave a legacy, life insurance can serve a role in your strategy.
There are six major types of policies, each with different structures and benefits. Some offer short-term leverage at minimal cost. Others provide guaranteed coverage until age 100 and can be blended to create a diversified insurance portfolio, much like an investment strategy blends stocks and bonds.
“Most people rent their coverage with term insurance,” Schmidt explains. “But if they don’t die during that term, the money’s gone. With permanent coverage, you’re building an asset—one that’s tax-free, creditor-protected, and provides long-term tax-free returns in excess of 6 to 7%.
Solving For Complexity With Simplicity
To demonstrate how his team builds these strategies, Schmidt walks through a hypothetical scenario: a business owner in his 50s with an estate worth $75 million and a potential estate tax bill of $25 million.
The solution isn’t just buying a single policy—it’s a layered approach involving gifting strategies, trust structures, and insurance designed to pay out outside the taxable estate.
Key to Schmidt’s process is the idea of separating ownership from control. The IRS taxes ownership, but not control. By placing policies and assets into irrevocable trusts, the family can retain control while removing those assets from the estate, thus eliminating or dramatically reducing estate taxes.
“We create an irrevocable life insurance trust that owns the policy,” Schmidt explains. “When the insured passes, the trust receives the death benefit tax-free and uses that cash to purchase illiquid assets from the estate, like the business or real estate. This provides the liquidity needed to pay taxes without forcing a fire sale.”
Why Families Trust The Process
While these strategies may sound complex, Schmidt insists they’re not beyond the grasp of motivated families. The key is education. His firm creates flowcharts that simplify each stage: the current plan, Phase One (lifetime gifting and discounts), and Phase Two (charitable and insurance strategies).
“Once they see it all on paper, the lightbulbs go off,” he says. “They realize how powerful it is to take a few steps now that will save their heirs millions later.”
And these plans aren’t set-it-and-forget-it. Schmidt recommends a cadence of reviewing the strategy every three years—more frequently if the business is sold or if significant new assets are acquired. “Things change, and your estate plan needs to evolve with your life.”
Charitable Trusts And Philanthropic Planning
Beyond wealth transfer, Sanford Schmidt is a strong advocate for charitable planning as a form of intentional legacy building. He distinguishes between “involuntary philanthropy”—taxes—and voluntary giving that is directed by the family through Donor Advised Funds (DAFs) or private foundations.
“Why let the IRS decide where your money goes?” Schmidt asks. “Instead, you can redirect that capital to causes you care about and still provide more for your family.”
Using tools like Charitable Remainder Trusts (CRUTs) and Charitable Lead Annuity Trusts (CLATs), families can take highly appreciated assets, gift them to tax-exempt vehicles, avoid capital gains, and receive an income tax deduction up front.
At the end of the trust’s term, the remaining value goes to a family-controlled entity like a foundation or a donor-advised fund.
These tools can be paired with wealth replacement trusts, funded by life insurance, so heirs are not disinherited. In fact, in many cases, Schmidt says, the family may receive even more than they would have through traditional planning.
The Misunderstood Magic Of Life Insurance
So why isn’t everyone doing this?
“Because they don’t know they can,” Schmidt says. “Most advisors don’t educate their clients about these tools. After 42 years in this business, I still see families who’ve never been told about wealth replacement trusts or charitable planning.”
But when they are introduced to these strategies and shown how they interlock like pieces of a puzzle, the impact is transformative. Life insurance, in Schmidt’s view, becomes a gateway to financial peace of mind.
“There’s no other asset that provides this combination of guarantees, growth, and tax advantages,” he explains. “A Roth IRA might be income tax-free, but it’s not estate tax-free. Properly structured insurance is both. It’s one of the only places where your money can grow and transfer entirely tax-free.”
Why Sanford Schmidt’s Approach Works
The cornerstone of Sanford Schmidt’s method is integration. By weaving together lifetime gifting, trust planning, charitable strategies, and custom life insurance design, he empowers families to take control of their financial legacy, reducing taxes, preserving wealth, and aligning assets with values.
Whether you’re just starting to think about your estate or already have a team of advisors, Schmidt’s advice is clear: don’t overlook life insurance. Not the kind your HR department offers, but the kind that redefines what it means to build, preserve, and pass on wealth.
“At the end of the day,” he says, “this is about more than numbers. It’s about peace of mind. It’s about knowing that the wealth you’ve worked so hard to build will serve your family and your community in the best way possible for generations.”
For more information on how life insurance can fit into your own wealth strategy, visit Schmidt Financial Group or connect with Sanford Schmidt directly.
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