The Liquidity Paradox and How Colin Steinberg Solves Legacy Funding Without Gift Tax Friction

More than 1,000 people are becoming millionaires in America every day. Yes, factors like inflation are making that number less robust, but the fact still stands that there are nearly 24 million individuals with significant net wealth that have at least hit the seven-figure mark.

Some of these are business owners with money tied up in their businesses. They’re “paper rich,” but they’re looking for ways to transfer static assets to future generations. They’re cash-strapped and unprepared. Many don’t even have a real succession or estate plan in place to effectively distribute their wealth after they pass, even as they chase their goals and their companies grow. They aren’t sure how to navigate the sticky web of trapped equity, ever-changing tax rules, and the fear of losing control of their wealth in the present.

This is the liquidity paradox many founders face, and it’s an important conversation to have before a big exit or other liquidity event.

The Three-Headed Monster for “Paper-Rich” Founders

When a business owner is rich on paper, but their wealth is locked up in assets (i.e., they lack liquidity), and they start thinking about how to transfer their accumulated wealth to the next generation, they face three common barriers:

• They lack the cash needed to make large gifts or fund big life insurance premiums upfront.
• They are reluctant to burn through lifetime exemptions (the maximum total amount they can give away during life before gift and estate taxes kick in).
• They don’t want to write gift-tax checks to the IRS for money or property given away beyond those lifetime exemption limits.

These hesitations are real, and it’s part of why over half (56%) of Americans in 2026 don’t have a single estate planning document in place. The issue isn’t a lack of interest. Many founders want their wealth to reach their kids, and even their grandkids. They want to gift intergenerational wealth down their family lines. Over time, if a first generation of kids becomes uninsurable due to age, health, or some other factor that gets in the way of traditional life insurance, an entrepreneur might want to allocate funds right to grandkids anyway.

But they’re paralyzed by their lack of liquidity and lack of options. They don’t want to set up a decade-long plan that leaves a mess, or even worse, leaves them out of control of their own wealth. That’s where forward-thinking estate planners like Colin Steinberg are making a difference.

A Different Path to Estate Planning and Legacy Funding

Colin Steinberg is a highly regarded wealth advisor known for designing complex executive wealth and estate planning solutions. By understanding the unique challenges faced by “paper-rich” founders, he has helped high-net-worth individuals implement strategies that reduce tax burdens while preserving control over their wealth and legacy. Two of the core tools often used in this alternative approach to estate planning are Multi-Generational Split Dollar arrangements and Premium Financing.

How Multi-Generational Split Dollar Works

Multi-Generational Split Dollar is a strategy built around a structure commonly referred to as Private Split Dollar (PSD). In its simplest form, a trust is established for a founder’s grandchildren (Generation 3, or “G3”). A life insurance policy is then purchased inside the trust on the lives of the founder’s children (Generation 2).

This structure allows the family to secure significantly lower insurance costs by insuring younger individuals, while preserving the ultimate benefit for future generations.

Under a PSD arrangement, the founder advances premiums to the trust using a loan-style split-dollar structure rather than making a direct taxable gift. This can help avoid gift taxes, preserve lifetime estate tax exemptions, and create an estate freeze that shifts future appreciation outside of the taxable estate.

Equally important, the structure allows wealth to remain in a clearly defined and controlled environment, which is often a key concern for founders and business owners. When designed and overseen properly, these arrangements can create significantly greater long-term legacy value than a traditional inheritance transfer.

Layering in Premium Financing

While Multi-Generational Split Dollar helps direct wealth efficiently to future generations, many founders also choose to incorporate premium financing to expand the overall funding capacity of the strategy.

Premium financing uses third-party bank lending to finance life insurance premiums, allowing clients to leverage their balance sheet rather than contributing substantial personal liquidity upfront. In many cases, this enables families to create significantly larger trust structures while preserving working capital and investment flexibility.

Third-party lending can also reduce the immediate cash strain associated with large insurance premiums. For founders with concentrated or illiquid wealth tied to a business, this creates a pathway to establish estate liquidity today without requiring a sale of core assets or forcing a premature exit strategy.

In effect, the strategy can help transform illiquid balance sheet wealth into future tax-efficient liquidity for heirs, while allowing the founder to maintain operational and financial control during life.

Addressing the Emotional Component of Intergenerational Wealth Transfers

Beyond the technical tax and financing advantages, these strategies also address one of the most overlooked aspects of estate planning: the emotional challenge of transferring wealth.

For many founders, wealth is deeply connected to identity, purpose, and decades of work building a business. Traditional estate planning techniques can sometimes feel emotionally difficult because they require giving assets away irrevocably and surrendering control.

A loan-based approach can help alleviate many of those concerns. By loaning assets to an irrevocable trust, founders often retain access to their original contributed capital in ways that traditional gifting strategies may not allow. In addition, when bank financing is incorporated, the founder may be able to establish significant legacy structures without transferring substantial personal assets at all.

As Colin often emphasizes, “Simply giving assets away is no longer the only way to create a legacy.”

This type of structured planning allows founders to remain actively involved in the process while establishing guardrails around how wealth is managed and distributed across generations. Rather than feeling like a surrender of assets, the process becomes a strategic repositioning of wealth designed to preserve family legacy, maintain flexibility, and create long-term impact.

The Estate Planning Takeaway for Under30 Founder

So, what does this mean for a young entrepreneur who is thriving in their business early in life? First off, don’t allow your youth to lure you into a false sense of financial security. If you want to preserve your wealth, start thinking about estate planning now.

You might not have grandkids yet, but you can start looking for an experienced advisor to help you create a plan and then, critically, keep that plan up to date over the years as tax policies shift along with the financial tools like trusts and life insurance policies used to navigate them.

It’s also important to build up a positive and proactive mindset around your financial legacy. If you’re paper-rich, remember that waiting can make tax and control problems bigger over time.

Don’t wait if you don’t have to. Instead, start establishing your wealth management values now. Set legacy goals. Bring in an advisor early, not at the last minute. If you can maintain a forward-looking approach to your wealth management, you can make the most of generation-skipping, loan-based planning, and every other wealth management tool available to keep your wealth in the family and make sure the IRS’s slice stays as small as possible.