- Grandfather yourself for tax free accumulation
and tax free income.
In this educational video episode,
I'm going to address the question,
what should you do with a lump sum
of money from a legal settlement,
an inheritance or maybe the sell of an asset?
Get ready.
It's probably not what you think.
(upbeat music)
So I'm Doug Andrew
and I've been helping people optimize assets
and minimize taxes now for nearly five decades,
helping people primarily save
for long term goals, such as retirement.
But when I meet with people to help them choose
the best alternatives to accumulate their money tax free,
not just tax deferred.
So I'm not a proponent of IRAs and 401ks and pension plans
and what have you.
My favorite vehicle, I call the laser fund
which is an acronym
L-A-S-E-R stands for Liquid Asset Safely Earning Returns.
And so I'm gonna gift you a copy
of a book called, "The Laser Fund"
at the end of this episode
as they token of appreciation for watching this,
because you may want to consider a laser fund
for a lump sum of money
that you might be expecting is impending.
And where do these lump sums come from?
Well, I've met many, many people that they come
to me because they want to make sure that they
don't outlive their money during their golden years.
Sometimes I'm having to do strategic rollouts
from their IRAs or 401ks to optimize those assets,
get the taxes over and done with sooner than later,
so that they can be immune from taxes, inflation,
and market volatility during their golden years.
Those three big dangers,
taxes inflation and market volatility,
are what caused most Americans to outlive their money.
Well in the process, many, many times people will share
with me that they have a lump sum
of money or capital maybe sitting in a bank or credit union
and they don't know what to do with it yet.
They've been waiting to figure it out,
but life gets busy or they know
that they're going to receive a lump sum
of money or a windfall within the next six months,
a year even two or three or four years down the road.
Well, where do these lump sums generally come from?
This capital, 'cause money is capital,
could come from a legal settlement.
So I've had many, many people who knew
that they were going to be awarded
in a a settlement,
$500,000, a million, 2 million
from an automobile accident
or maybe malpractice because of a surgery they had,
whatever it is.
So legal settlements sometimes create a lump sum
of money for people.
And they don't know what to do with that.
It could be a life insurance policy that paid out at death.
And so you're receiving life insurance proceeds
from the death of a loved one.
And you were named the beneficiary.
It could be an inheritance where your parents
or your aunt or whoever
passes away.
And they named you as one
of the beneficiaries or maybe the sole beneficiary.
I just had recently a a young man that inherited about four
and a half million dollars from his grandmother.
And then from his folks who all passed
away within one year of each other.
And so it could come in the form
of an inheritance where you're receiving a lump sum
of money and it could be assets.
It could be properties or stocks or 401ks.
And so you're gonna have to liquidate
those sooner than later.
And what have you and pay the tax on it.
And people say, what do I do
with this lump sum of money that I'm going to receive?
Especially after I sell their home
or after I sell their stocks or liquidate their 401k.
Because if you inherit a 401k, non spousal heirs,
you have to pay tax on that within 10 years now.
You can't keep it until you retire.
You can't keep postponing or deferring the tax on it.
The government wants their share of that sooner than later.
It could be from the sale of an asset.
So maybe it didn't come from an inheritance,
but maybe you're selling your business
or your dental practice or what have you,
or maybe you have a piece of real estate
and you're tired of being the landlord,
fixing toilets, evicting tennis,
and taking out the trash and you just wanna sell it.
So maybe you're selling an asset, a machinery or a property,
or rental properties, and you have this lump sum.
So lump sums can come from anywhere.
All too often, people take those lump sums
and they park it in a bank or credit union temporarily,
but then it sits there for six months, a year, two years,
earning next to nothing.
And of course the current of inflation's usually coming down
much faster than the one or 2% interest
that they're earning at the bank.
They're rowing upstream at the rate
of one or two miles an hour.
The current of inflation's coming
down much faster than that.
So they're going backwards,
the more they let it sit.
So what should you do with lump sums?
I've had many, many people ask me this question.
So without hesitation, I say, well, if I were you,
I would keep that money liquid and safe.
And if it's coming from life insurance proceeds
that is tax free.
Many settlements are income tax free.
And so I say, you know what?
I would keep it tax free.
So you do that,
by putting that money that you don't have to pay tax on,
into an insurance policy on yourself
or you can use a surrogate if you're uninsurable,
but it's the owner of the insurance policy
that gets all the tax free accumulation.
But what you're doing is you are taking the least amount
of life insurance death benefit that the IRS
will let you get away with.
And you're putting in this lump sum
of money so that it earns a rate of return tax free,
the best internal rate of return possible.
So that if that insurance policy like mine,
have earned the last 25, 30 years, 11.17% average.
If I earn 11, I wanna net 10.
I wanna net within 1% of the gross rate of return.
I want the cost of the insurance to only drain
out about one percentage point
of the interest I'm earning on that.
Now, if you're going,
I've never seen an insurance policy pay
an average return of 10% or 11%.
Well, then you haven't seen one designed correctly
and funded properly to be deemed what I call a laser fund.
Okay?
And that's why I'm gonna gift you a copy
of of that book at the end of this episode.
So when people come to me,
it doesn't matter if it's a $100,000, $500,000,
$2 million, $10 million
they have these lump sums.
Now on this channel,
I talk about how you structure a laser fund correctly.
And if you want to accumulate the money tax free
and then be able to access the money tax free,
you have to comply with a tax citation called TAMRA.
It stands for, it's an acronym, and it stands
for the Technical and Miscellaneous Revenue Act of 1988.
So let's say you were gonna reposition
a million dollar lump sum amount of money.
The most you could put
into that insurance contract would be about 20% a year.
So about $200,000 a year.
If you had a lump sum of $500,000,
that would be about a hundred thousand a year.
And so you may have to park
the rest of it somewhere temporarily,
while you're satisfying this TAMRA law.
If you don't satisfy TAMRA, it will accumulate tax deferred,
but that's like an IRA or 401k
or an annuity, it's only tax deferred.
When you go to access the money,
you're now gonna have to pay tax on the gain that you made.
I want it to be tax free.
I want that million to grow to $2 million,
every seven and a half years at an average return,
like I've earned since 1980 on these contracts, 9.6%.
Your money doubles every seven and a half years.
So that if you have $2 million that could generate
a payout of nearly $200,000 bucks a year tax free.
I want tax free growth.
I want tax free income.
So you have to comply
with sections of the internal revenue code.
72(e) allows your money to grow tax free
but 7702 dictates how you can access the money
without paying income tax.
And you have to comply with TAMRA..
Okay?
So when you have a lump sum, it's imperative,
you go to somebody who's a professional
who knows how to structure a max funded indexed
universal life insurance contract correctly
to comply with TAMRA so that you can spread it out.
So let's go back to a million dollar example
and you can extrapolate from that.
If I design it to hold $200,000 a year,
I can put in $200,000 the first day of the first year,
$200,000 the first day of the second year.
And so you just count that up.
In four years and one day, one day into the fifth year,
you can put the last $200,000.
Now you've got your million bucks in there,
so you can do it that way.
And now all the growth
and all the money you take out of that,
as long as that stays in force,
will be totally income tax free the rest of your life.
And if you die, anytime, anything left in there will blossom
and transfer income tax free to your heirs,
whoever you name as the beneficiary,
nothing else does that in the internal revenue code.
It allows you to accumulate your money tax free,
access that money totally income tax free.
And when you die, it blossoms, it increases in value.
See, I'm 70 right now.
If I died, every million I would have in my portfolio
of laser funds would double to about $2 million
and transfer tax free to my wife, my kids, my grandkids,
a church to charity, whoever I want and people say,
Hmm, how much does that cost?
Well, nothing's free,
but it doesn't cost me anything.
It's being paid for with a minuscule portion
of money that would otherwise go out the window
in unnecessary tax,
if I put money where most people put their money
and taxed as earned or tax deferred investments, okay?
They have to earn 15 to net 10, in a taxable investment.
I only have to earn 11 to net 10.
That 1% is not tax.
It's the cost of the insurance that makes
the whole thing tax free.
That's why it's a minuscule portion of money
that would otherwise go out the window in tax,
if I put it in a tax as earned investment
or a tax deferred investment, does that make sense?
So if you are expecting some impending event
where you're going to realize a lump sum of money,
I would recommend that you check out a laser fund,
sooner than later.
Now, if you are pretty sure you're gonna receive that money
within the next five years,
you can actually set up a plan to be able to accommodate,
let's say a million dollars or a half a million, whatever,
whatever that lump sums gonna be,
you can set up a plan to do that
and you don't have to put in $200,000 a year,
you could put in 10 or $20,000 a year
and sort of nurse it along so that if you put in $20,000
and you could have put in $200,000, that grandfathers you.
So let's say you put in $20,000 the first year,
$20,000, the second year,
$20,000 the third year,
20,000, the fourth year.
You put in $80,000
but you could have put in at that point $800,000.
Now you finally received the inheritance
or you finally get the settlement because it took so long.
And now because you've grandfathered yourself,
you can throw in that $800,000,
the remainder, which would be $720,000, in this example,
in one fell swoop.
And on the first day of the fifth year,
four years and one day,
you can put in the last 200 grand
and see, you don't have to wait five years.
If you wait till you have the money in hand,
then you have to start the five year clock.
And so it will take five years.
If you know what's coming,
most of the time, I recommend people
grandfather themselves,
while they can qualify,
get that water under the bridge,
so that you can nurse it along.
You've gotta be able to pay the minimum amount,
which might be one 10th that.
And then if you don't use the room, the IRS gives you,
you never lose that room.
If you could put in a hundred thousand
and you only put in $10,000, you have $90,000
of room that you haven't used yet for every year.
You can throw that
in all in one fell swoop when you get it
and you have not violated the TAMRA tax citation,
it's still gonna be tax free when you access it.
So if you wanna learn more about this, it's incredible.
If you are planning on receiving a lump sum
from the sell of an asset,
inheritance a settlement, a legal settlement,
a death benefit,
I would recommend you accumulate
that money tax free and grandfather yourself,
so you can access that money tax free.
And if you happen to die,
it blossoms and transfers income tax free.
I want you to earn a rate of return
like I have of nine, 10% is what I've averaged
for the last more than 40 years now, since 1980.
But you need to do that by establishing a laser fund.
I would recommend sooner than later, so you can qualify,
and if you don't use the room,
if you haven't got the lump sum yet,
you can grandfather yourself to catch
up or be able to put
in the lump sums at any point in time down the road.
But that way you're letting the contract sort of mature
or season that will build up the room,
so you can throw in more
of the lump sum when you do receive it.
So if you wanna learn more about lump sums,
I have a chapter in this book on it.
This is "The Laser Fund," I want to gift you.
Here's how you claim your free copy.
You simply go to a L-A-S-E-Rfund.com
or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
Come on, have some skin in the game.
I will cover the rest of that cost.
And I will pay for the book.
It's 300 pages.
This side is 200 pages, 14 chapters,
with all the charts and graphs explaining how to diversify
and create the foundation for tax free accumulation
and what have you.
If you learn more by stories,
you're a right brain learner.
You flip it over to this side
about a hundred pages, 12 chapters.
And one of these chapters talks
about what to do with lump sums.
There's all kinds of other uses
for a laser fund, retirement, college funding,
real estate management,
but for lump sums,
this is a dream come true,
rather than just keeping the money parked
in a bank or a credit union.
'Cause these insurance institutions are usually
ranked about six notches higher in safety.
And your rate of return's going to be five times
what the banker credit union is gonna pay you,
sometimes a lot more.
So go to laserfund.com.
If you like to listen and learn and watch
and learn there's options there for audio and video.
Check out some of the educational webinars
we do on a regular basis.
And you can even put yourself
into an IUL specialist calendar
to be able to pick their brain
on how a laser fund may help you
in your particular set of circumstances,
if you've got a lump sum or maybe somebody you know,
your folks has a lump sum coming,
so that you can begin to get grandfathered
and take advantage of tax free accumulation
and tax free access using one of my favorite
financial instruments, the laser fund.
(upbeat music)