Grandfather yourself to invest tax-free for the future. In this episode, I'm going to address reason
number five of five reasons to borrow money instead of withdraw money from an IUL policy.
By the end of this video, you will understand that
you can grandfather yourself to reinvest money that you borrowed.
So, I'm Doug Andrew and I've been helping people optimize their financial assets and
prepare for a comfortable retirement or other long-term financial goals for more than 48 years.
If you've watched very many of my episodes on this channel or read any of my 12 books
my favorite financial vehicle that allows you to accumulate your money tax free and then be
able to access your money totally income tax free and when you ultimately die whatever
is in there blossoms and and you leave behind more income tax free to your heirs is a maximum funded
indexed universal life insurance policy but it must be structured correctly and funded properly
to pass the laser test. Laser is an acronym that stands for liquid assets safely earning returns.
The laser test is liquidity safety rate of return and tax benefits in that order and I'm going to
gift you a copy of a 300-page laser fund book at the end of this episode. So, stay with me. But this
is reason number five that when you accumulate money in one of these and I have actually averaged
9.62 rate of return tax-free ever since 1997, that's average. Now, yeah, there's some years I
didn't earn very much zero, one, or two percent but I didn't lose when everybody else in America was
losing you know 40 percent like in 2008. I didn't lose. I mean, they'll have made much but in
2009 I locked in gains of 16% after not losing. Most Americans took four years to make back what they
lost in 2008. This is unbelievable because people at the end of 12 years of the great recession 2000
of the year 2012 had as much as two, two and a half, three times, the money in IUL policies than
if they had that money in the market in the S&P or The Dow Jones or what have you and it's
totally tax-free. You can watch other episodes to understand how to accumulate your money tax-free
under three sections of the internal revenue code section 72(e) 7702 and 101(a) and how to comply to
three tax citations called TEFRA, DEFRA, and TAMRA. So, those are on this channel let me just summarize
by saying. Whether you started out stocking away 500 bucks a month or you started out with a lump
sum of a hundred thousand per year or 500,000 one time. It doesn't matter we have people that
accumulate a million bucks at 500 a month earning 9.6 average for 30 years or 500,000 doubles every
seven and a half years at 9.6% and it's worth 8 million at the end of 30 years or a hundred
thousand dollars a year is worth a million or two or three million depending upon the point in time
that you now want to start living off of or generating an income stream which is normally
at retirement, it doesn't have to be. You don't have to wait till you're 59 and I have to access
money out of an IUL policy. But it's tax-free if you do it the smart way. Now, in this five
series episodes of how to take money out the smart way by borrowing instead of withdrawing.
This is the final episode and I would recommend you watch the other four but I'm going to connect
some dots here. In this series, I've talked about okay you want to create a predictable payout more
like 10 percent without depleting principle. If you take it out the dumb way you're going to
trigger tax sooner or later by withdrawing your money. The smarter way is to borrow and people go,
why would you borrow your money? Because if I have a million dollars in an insurance policy and it's
earning 10 percent yeah you could withdraw your interest but after you've recovered your basis
that's the amount of premiums you paid into it you're going to now have to pay tax, that's done.
The IRS says no change the nomenclature borrow. So, in the previous episodes in this series, I say, well
you have different options when you borrow. If you borrow the equivalent of your interest the
insurance company is loaning you that and loan proceeds whether you borrow for a car for a house
that's not subject to income tax. It's not deemed to earn passive or portfolio income
when you have loan proceeds. So, the IRS is borrow the equipment of your interest. The insurance
company will loan you the equivalent of your interest and just keep your money there growing.
So, if you borrow you can play it safe and they'll charge you two percent because the IRS says it has
to be construed as a true loan to be tax-free. They charge you two percent on the loan not bad
and they will credit you two percent on the interest that you earned and so that's called a
zero washer or zero cost loan it doesn't cost you anything and people can borrow for 20 years and
it doesn't cost him anything and it's tax-free. The fourth reason I gave in this series was
that many savvy people use index loans. They tell the insurance company most of the time, "Hey, charge
me a little bit higher rate four or five percent", and then the insurance company will credit them
whatever the index is for that year. Now, some years maybe they get accredited less than the
borrowing rate of four or five percent but most of the time I'm talking about 70 of the time or
more they are credited with a way higher rate than they're being charged and in the fourth
reason I gave an example of one of our clients in 2017 that borrowed a million at five percent
and he earned 25% and so he made a quarter of a million minus 50,000, he netted
20% or 200,000 tax-free on his million while he was actually using
the million in his business to make three million. This blows people away but this is how savvy
investors understand how to do this how money works. Now, in this last one the fifth reason
you wouldn't believe how many financial advisors don't understand this. So, the IRS says it's a loan
it's not doing payable during your lifetime, it's washed away with the death benefit. Why?
Loan proceeds are simply they're tax-free and they accumulate it's called a phantom loan and so
most of the time if I had a million-dollar nest egg and I'm earning 10 percent or I'm taking out a 10%
payout which we've had many clients do for years without depleting principle, okay. So, a million
dollars would generate a hundred thousand a year of tax-free income that you're borrowing. So, you've
got a hundred thousand coming out the first year and then another hundred. Now, you have two hundred
thousand in a phantom loan and then 300, 400, 500 thousand. You do this for
20 years and you have 20 years times 100,000 that's two million dollars in
loan balance plus the interest, okay. Offsetting that over here is your accumulation balance
and that's accumulating either at the same rate you're borrowing okay the zero wash loan. But the
index loan you're earning the index rate which is maybe 7, 10, 15, 25, 61, 153% like in the year 2021
you're earning way more than the cost of the loan. Let's just say 20 years down the road you have a 2
million dollar loan balance. Why is that a good thing not just because it's not doing payable
it'll be washed away if you die. Before I explain why this is brilliant. If this is intriguing you,
I would recommend you subscribe to this channel it's free just click the button subscribe to it. Also,
click that little bell then you'll be notified every time I post a new episode which I do almost
on a daily basis. But click like, post a comment, share this with somebody who will get the
same epiphanies that you got. Because you can't be aware of something you're not aware of. So, help
other people become aware of these opportunities. The loan is not doing payable during your lifetime
but doesn't mean you can't pay it back. Well, if it's not doing payable why would you pay it back.
There are many... times I've had clients that later in life they've been borrowing
and now they have a phantom loan balance of 2 million-plus interest. Let's just keep it
simple. Let's say it's 2 million dollars they own in a loan on their IUL policy. It's going
to be washed away when they die and they have all this money over here in the accumulation
and maybe they have 4 or 5 million minus the 2 million of loan and so they have a net of
3 million they leave behind you know when they die. Off times, things happen and they inherit money.
They sell their business. They sell their apartment complexes. They win a settlement
and they come to me and they go, "Doug, I've got 2 million dollars here.
What should I do with this? I'm old I can't qualify for one of these IUL policies anymore.
I'm not healthy enough and I go well we could use a surrogate, you can own one on your spouse your kids
or your grandkids. You can do that but I said, "Wait a minute, good news". Remember, I've told you the loan
is not doing payable during your lifetime? Yeah. Doesn't mean you can't pay it back. See, if you take
out a new IUL policy you have to wait 5 years to comply with the TEFRA, DEFRA, TAMRA, tax
citations. You can't put in all two million at once the most you could put in would be four hundred
thousand a year over five years and then it'll be tax-free ever after. You don't have to do that. Your
grandfather, what does that mean? You don't have to pay the loan back but you can. See, the IRS says,
"Oh, you took 2 million from this inheritance or the sell of a property or whatever
and you just paid off the loan". So, you paid off the loan balance in the insurance policy. Now, the
insurance company they look at it as oh, new money. Two million of new money's coming in this policy
and it's as if you don't have any loans and you just hit the ground running and that 2 million
can generate 10% payouts instantly. 200,000 a year of tax-free income out of that 2 million
instantly instead of waiting 5 years to be able to get 200,000 a year
tax-free. Because you paid off a loan you didn't have to pay back. The insurance company called it
a reinvestment new money. The IRS said, "Oh, you're just paying back the loan", you were grandfathered
and you have tax-free income instantly without jumping through the IRS TEFRA, DEFRA, and TAMRA
hoops. You want to see the magic behind the maximum funded index universal life policy and the smart
way to access money tax-free and be grandfathered. Because grandfathering also applies to other areas
with these IUL policies. I want you to claim your free copy of this book called the laser
fund. Again, the laser fund is a property structured maximum funded indexed universal life policy. Most
IUL policies would not be deemed a laser fund. This is a strict sort of criteria
and so this will teach you how to diversify and create the foundation for a tax-free retirement.
Now, you simply go to laserfund.com laserfund.com click on the link below.
You contribute a nominal amount towards the shipping and handling. I will pay for the rest
of that and I will pay for the book. I will fire out a hard copy to you this is about you and your
brighter future, I'll pay for the book. But there's options there to listen and learn, watch and learn.
There's even an 18-hour master class that you can invest in that will take you on a deep dive, okay.
But I also want you to check out some of our virtual events which we do on a regular basis and
we may come to your city someday and I would love to meet you. But claim your free copy now
this is two books in one if you haven't noticed. This side is for the left brain thinker charts,
graphs, explanations, 200 pages. This side is the right brain thinker all the stories and examples
62 of them. If you want to use both your right brain and left brain read both of these books.
But this is 300 pages of empowerment for you so that you will understand the smartest way
to accumulate money and then access that money. So, watch all five in this series so
that you understand why it's smarter to borrow instead of withdraw money out of your laser fund.