Life insurance is tax-free because people take ownership rather
than relying on government. In this episode, I'm going to
address the question "Why is life insurance tax-free?"
And you're going to understand why it's a sacred cow
in the internal revenue code for over a
century.
So, my name is Doug Andrew. I've
been a retirement planning specialist for more than 46 years. I've written 11
books thus far my goal is to write a book
every year the rest of my life. And as you go through this educational
video, I'm going to share with you a way to get
a copy of my most recent best-selling book. It's called The LASER Fund.
300 pages of charts graphs and explanations and 62 actual client
stories where you can learn more. I'll pay for the book. You pay $5.95
toward the shipping and handling which is a
little bit higher than that. And I'll send out a copy of the book for free. So
make sure you check on the link below to be able to
claim your free copy. But I've helped people
optimize their financial assets for more than 46 years. I'm in my radio
studio right now. See, I started a radio show 12 years ago.
It's aired weekly for 12 years running. I've written
several books. Why do I do this? Well, I help my own
clients prepare for retirement for more than 35
years. And then I decided to reach more people
to sell my recipe instead of sell the cake. And so, I had 3,000 financial
advisors cpas and tax attorneys from 2003 to 2007
come through in intensive 3 day training.
They paid 6 grand in tuition to learn this.
And back in 2005, I actually let all my professional licenses automatically
expire to become a consumer advocate. To teach
you in ways that I'm not allowed to say things if i have a license now. Isn't
that ridiculous? So, I'm going to shoot straight with you
here. When we talk about the tax benefits of life insurance, most
people go, "Well, why would you invest in life
insurance?" Well, life insurance should not be purchased as an investment.
Did you hear that? And yet that's where most of my clients have 40 to 60
percent of their income in retirement. Well, what is it if it isn't an
investment? According to the financial services
industry, an investment will be taxable sooner or later.
See, most people put money in tax deferred IRAs and 401Ks
in the market. That's an investment. In insurance,
that's a different part of the internal revenue code. I'm going to share the
sections with you here in just a second. And so, it's not an investment because
life insurance is totally tax free. If you
called it an investment by violating the definition
of tax free in the internal revenue code, it would move over to the investment
portion of the code and you would have to pay tax
on any money you made. And I've been making 7 to 10 percent rates of
return for the last 46 years on my max funded insurance
contracts. And, so I want it to be tax-free. So, I
don't want it to be called an investment. Also, most investments are subject to
market volatility. I don't want to lose money when the
market goes down. So, money inside my indexed universal
life makes money when the market goes up but it does not
lose anything when the market goes down due
to the market crash. My money is protected and safe because
it's not invested in the market. This is called indexed universal life.
And I've earned average net internal rates of return
between 6 to 10 percent for the last 46 years.
Meaning, my money that i put in there whether it's 10,000 a year
100,000 a year, a million a year will double every seven to 10 years.
And when I go to access money, every million
can generate 60, 70, 80, 100 thousand a year of tax free income
for as long as I live without depleting principal.
That usually is double what most IRAs and 401Ks invested in the market
generate. Most of them only give about 3.5 to 4 percent rates
of return. I can earn 8. I can earn 8 which
is twice as much as 4. My 8 percent is tax free.
3.5 or 4 percent in an IRA, 401K is yet to be taxed. And so, sometimes, I'm
able to achieve as much as 3 times or 4 times as
much income as money in the market in a traditional
IRA or 401K. Now, what makes life insurance a sacred
tax-free cash cow? So, when people purchase
life insurance, they're taking ownership.
They're trying to make sure originally if it was just for death
benefit that if they passed away with an
untimely death... When I was 30 years old, my wife and i had 6 children.
If I wanted to be responsible and accountable, take ownership for my family
not being a drain on society if I happen to die.
I can take out 30 times my income at age 30. Let's say I was making 100 grand a
year. I can qualify for 3 million of life
insurance. Well see, if I do that, if I happen to die
in an accident or heaven forbid i get a
terminal illness like cancer, then 3 million dollars transfers to my
wife, my children totally tax-free. And people say, "Well,
why is it tax-free?" Well, why would the government
tax something that will actually help the government not have to shell out
benefits, welfare benefits to widows and orphans? Why would they come in and tax
at 30 and 40 percent? So, all of a sudden widows orphans only have
50, 60 of what they could have had to not
have to be a drain on society. So, it takes
pressure off of the government to provide
for people whether they are using life insurance for retirement income benefits
like I do. Or whether it's in case of a death or
disability. So, the government has always said money
inside of an insurance policy will grow tax free. With interest, dividends, however
it's growing. Now, that is provided under section 72E of the internal
revenue code. I explained these sections of the code
inside my most recent book The LASER Fund.
You can click on the link below and claim your free copy. I'll share how you
can do that. But then a lot of my clients will use
life insurance for living benefits. So, rather than whole life which is
primarily designed and created for death benefit, I
use max funded indexed universal life for
living benefits. And that's where I've averaged between
6 to 10 percent tax-free rates of return.
And so, by doing that, I'm taking the least amount of insurance
the IRS will let me get away with and putting in the most money as fast as the
IRS allows. And that's under three tax
citations called Tefra, Defra and Tamra. You can learn about
those on other episodes on this channel. But that allows me to access
money tax-free. Not just in retirement, anytime. I have people in their 30's and
40's that access a million dollars out of their
insurance policy tax-free. There's no penalties.
You do that under section 7702 of the internal revenue code
and you must do it the smart way. See, there's a dumb way and there's a smart
way which i teach on this channel also. And you can learn about that in the book.
But it's the only vehicle in the internal revenue code. I'm talking about
max funded indexed universal life that allows you to accumulate your money
tax-free at a great internal rate of return and
be able to access that money totally tax-free. But when you ultimately
die, because we sooner or later we'll all
graduate, so to speak. It blossoms in value and transfers
income tax-free. If I die right now, (I'm 68)
every million would blossom to about 2.5 million in my
laser funds, in my max funded indexed ULs
and transfer totally income tax-free. There's
not an IRA, 401K or a roth-IRA, 401K that can come close to doing
that. I have more flexibility. I can put in
much more money into these than an IRA and 401K.
This is why this is sometimes referred to as the Rich Man's Roth.
You don't have to be rich to own one but rich people can't qualify
to own a Roth. And so, I can put in big sums of money. I can take money out.
When I'm in my 30's and 40's, there's no IRS penalties.
I can participate when the market goes up without my money at risk in the
market. When the market crashes, I don't lose a
dime due to market volatility. And when they ultimately die,
it blossoms. It sometimes doubles triples and transfers totally tax free. That's
under section 72E, 7702 and 101A of the internal
revenue code. You're also complying with Tefra, Defra
and Tamra tax citations. You're probably wondering,
"What do those mean?" You want the answer? It stands for
the tax equity fiscal responsibility act of 1982.
The deficit reduction act of 1984 and the technical and miscellaneous revenue
act of 1988. All you need to know is it allows me to
be able to put money in earn incredible rates of return where I
can earn 11 and net 10. I can earn 8 and net 7. I can
earn at 25 and net 24 which I've done many times. And I'm able to use it
for living benefits. And so, you can learn about tTefra, Defra,
Tamra section 72E, 7702 and 101A by reading
my books, by watching some other YouTube episodes that talk about this.
But when you begin to understand this, the purpose
of max funded insurance is primarily for living benefits. And when you look at
that, the general accountability office clear back
in 1990 said, "You know what? If we taxed these, it
would cost the government more than if we just left
them alone." Because they were smart enough back in
1990 when they were sort of greedy for tax revenue.
They did a study and they said, "If we taxed these,
we would end up shelling out more in welfare retirement benefits to the
people we took it away from than we generated in tax revenue on the
short run. It would cost us way more in the long run."
So, leave them alone. You know the second reason why they said leave him alone?
Because a lot of congress people own these. The third reason they said, "If we
ever tax these, grandfather everybody who already has them." This is provided
in the constitution expo, facto provision of the constitution.
And so if they do change tax laws in the future,
you can get grandfathered so that you do not have to adhere
to new tax law when you set up something under old tax law. That's called
grandfathering and that precedent has been set.
I own some insurance policies prior to tefra, defra and tamra. I've never had to
comply with those tax citations on those
grandfathered insurance policies. So, learn more.
Read the book. It's 300 pages. It retails for $20.
Don't pay 20 bucks. I want to gift it to you for free.
If you will click on the link below or go directly to laserfund.com,
just pay $5.95 towards the shipping and handling
because it usually costs a little bit more than that. And
I'll buy the book. You contribute towards the shipping and handling and you can
begin to learn. Its 300 pages of charts graphs and
explanations and actually 62 client stories to illustrate what we're
talking about here. So, here's to your brighter future.