Updated: Dec 21, 2022
One question that I repeatedly get when I’m talking with clients is: how come I never heard of this before, or why didn’t my parents teach me this? To answer this two-part question fairly, I need to start with a little background information. My parents were also lumped into this group who didn’t know what they didn’t know. The truth is that as with most things in life, the world is ever changing, and that means new technology, new philosophies, new methodologies, etc. In the world of finance, there have been numerous legislative changes in the past 50 years. Many are for the better as far as protecting the consumer. That said, there are still going to be uneducated, or self-interest biases that hinder finding the BEST solution rather than just a satisfactory one.
If you are as old as me, you may remember there was an old commercial on television with the phrase: when E.F. Hutton talks, everyone listens. Well, a lot of people did listen but so did the IRS, and as with many great things, the government wants their fair share. So, fast forward a few years later, and the IRS had control over how much life insurance a person could have on oneself. You may think, why is she talking about life insurance? Let me explain.
Many people are not aware that life insurance is real property, just like real estate. It can be sold, and it can grow tax free. Only permanent life insurance can grow tax free, but with precision designing and an expert panel analysis, an individual can create his or her own bank. The way this works is you must qualify for the coverage. You must be able to contribute a certain amount of premiums to keep the policy in force and to provide for the upfront costs of having the insurance. The cost is relative to age and health – how much risk are asking the insurance company to carry on your behalf. The really awesome part of having your own bank through life insurance is that you have some liquidity if an emergency arises. Better still, if you are just wanting to pay your child’s first year of tuition, withdraw the money and let the indexing continue working for you and accruing interest even though the money is spent elsewhere. This is what the banks do with our money in our accounts every day. Arbitrage is the smart use of money to make money. Why not collect the windfall rather than paying the bank to borrow?
When I first merged into finance from 30 years of straight real estate, I never dreamed I would learn as much as I did about money, risk, retirement, and the importance of careful planning. I could go on and on. One thing I’m grateful for is the knowledge I gained to make significant changes to my family’s future. We thought we were smart to build a 529 plan for college. That money is strictly for academic purposes, and when it’s gone, it’s gone. By setting up our children with their own banks, they can use the money as needed, keep growing tax free and have a nice nest egg and long-term care plan in place.
Now that I am with MVPL – A Wealth Resource Consulting Group, we have branched into all things wealth accumulation, tax mitigation, and smart investing. We work with a faculty of experts to guide us in assisting clients. If you haven’t started planning for your future, it’s no cost to you to talk with us and know your options. Because we customize each client’s personal plan according to their needs, we do not push a product to sell. We educate you on the pros and cons of the various designs, and let you make the most comfortable decision for you and your family. Our main purpose is to help keep wealth in the family.
For more information, please email us at email@example.com.