Life insurance proceeds are income tax-free.
In this episode, I'm going to address the question, "Do you pay taxes on life insurance
proceeds?"
Well, the simple answer is no.
But it's way more than that.
Get ready to be blown away.
My name is Doug Andrew.
I've been a financial strategist, a retirement planning specialist for more than 4 and a
half decades.
Clear back in 1974 when I started, I actually got my series one securities license.
They don't even offer that anymore.
I could sell in stock-bond, mutual fund in America.
Okay?
But I also got my insurance lisence.
So, I've helped many, many people obtain life insurance not only in the event that they
die with an untimely death which is being responsible and accountable.
But also maximum funding insurance for living benefits.
For most people a long time.
And the beauty of an insurance policy is not only that when you ultimately pass away, life
insurance death benefit proceeds are totally income tax-free.
But money that builds up inside the insurance policy is tax-free.
But unfortunately, a lot of people think, "Well, insurance is for death.
It's not for accumulating money."
I'm going, "What?
Hello?
It's tax-free."
EF Hutton back in 1980 realized this and my said, "My heavens!
It's tax-free!"
Instead of taking the amount of insurance you want and trying to shop for the cheapest
premium that you can find, they said, "why don't we take the least amount of insurance
we can get away with and put in the most premium the IRS allows.
And it will accumulate tax-free into this cash cow.
And this is where I have earned rates of return of 7 to 10 percent for the last 40 years tax-free.
That's better than any IRA or 401(k) that is only tax-deferred.
See an IRA or 401(k) has to earn 15% to net 10.
My insurance contracts for 25 years have earned 10.
They net 10 tax-free.
And it's much more stable than an IRA or 401(k) in the market to try to earn 15 and then net
10 after paying tax at the end of the day.
But let me share with you 3 sections of the internal revenue code that make a life insurance
contract a sacred tax-free cash cow.
So, before I share with you 3 sections of the internal revenue code that protect life
insurance contracts from being taxed, let me share with you how you can learn even more
about this topic and others.
Hit subscribe, share this video with people who also were wondering the same thing.
Because I'm passionate about educating people like you.
Back in 2005, I let all my professional licenses go to become a consumer advocate.
So, I'm into educating you.
And at the end of this episode, I'm going to show you how you can claim a free copy
of my most recent best selling 300-page book, The Laser Fund which is a maximum-funded,
tax-advantaged life insurance contract that most people use for living benefits, for retirement,
for college funding, for their kids, for working capital, for business and on and on and on.
But when they ultimately pass away, anything in the insurance policy blossoms, increases
in value, and transfers income tax-free.
If I were to die tomorrow, I'm 68, if I died in an accident, right now, every million in
my portfolio of insurance policies would blossom to about 2 and a half million totally tax-free.
Why?
That has been a sacred cow in the internal revenue code for as long as the code is been
around, 1913.
Okay?
Why?
Why does the government do that?
Because they realize that if they taxed life insurance, why would people buy life insurance.
Usually, so that if they passed away, it provides the means, an immediate state that will take
care of people --provide college educations for your kids, your grandkids or pay off the
house or whatever had you stayed around.
Why would the government penalize people for trying to be self-reliant?
Because they've done studies and found out that if they taxed it, they would be shooting
themselves in the foot.
In other words, if they tax those, then those people, a few years later, widow and orphans
would be coming around for government help for welfare.
And so, why do that?
So, so fat, it's been a sacred cow.
Leave it alone.
Well, as far as the money that grows inside of an insurance policy, those are called cash
values.
Now, a lot of times, people think, "Well, why should I pay more than I need to to be
insured the rest of my life?"
Because it's tax-free.
EF Hutton who was not an insurance company, they were a brokerage firm.
They realize a lot of people have their money in the market in stocks and was like a person
with a yo-yo hopefully walking up some stairs.
But I don't know if you have ever played red light, green light.
See, as a kind playing red light, green light, there are sometimes I might advance 20 steps
and then take back 10 steps.
People with money in the market, some periods you might make 20%.
And then in the next period, you lose 10.
You're going back and forth, back and forth.
EF Hutton said, "Why are we doing this?"
Especially, if we averaged even 12% which most people don't do.
On a million dollars, if you were going to average 12% rates of return, that would be
120,000 a year.
And they realized, you pull out 120,000 out of a million-dollar nest egg, you're going
to pay tax of about 40,000 between federal state tax.
You're only netting 80.
And then you have another 1% in fees.
You're only netting 70.
You have to earn 12, 120 grand to net 70 to buy gas and groceries.
They said, "Why are we doing that?"
Back at that time, it was 1980.
"Why don't we take 11 steps forward and only 1 step back and net 10% tax-free?"
In other words, most insurance companies on their general account portfolios were earning
between 11 and 3 quarters and 15 and a half percent.
I never earned less than 11 and 3 quarters from 1980 to 1990.
So, with that metaphor, I was taking 11 steps forward, 1 step back.
What's the 1 step back?
It's not tax.
It's the cost of the insurance that the IRS has to be there or it's not going to be tax-free
in the code.
The internal revenue code says, "Money inside of an insurance policy grows tax-free."
That's section 72 (E).
When you go to access money, if I have a million dollars in there, I can pull out 900,000.
I could pull out 100,000 a year for retirement.
It's tax-free.
That's section 7702.
And when I ultimately die, anything left in there blossoms, increases in value and transfers
totally income tax-free, section 101 (A).
It's totally tax-free.
A maximum-funded insurance contract, what I call the Laser Fund.
Laser is an acronym that stands for liquid assets safely earning returns.
It's the only financial instrument that allows you to accumulate your money tax-free, sections
72 (E).
Access you money tax-free, section 7702.
And when you die it blossoms, increases in value and transfers income tax-free, section
101 (A).
Show me anything else that does that.
A Roth does not do that.
And so, this is my favorite vehicle for all kinds of goals because you do not pay tax
on an insurance proceeds which is what this episode is about.
But hello, you don't pay any tax as it growing either.
So, this would be like and IRA or 401(k) on steroids.
But when you die, nobody pays tax, it blossoms.
it'd be like and IRA or 401(k) that has a million and when you die, it automatically
turns in 2 and a half million and transfers income tax-free.
Your spouse, your kids don't have to pay tax.
There's none an IRA or 401(k) around that will do that.
But the laser fund will.
Why not employ a laser fund?
It is way better than an IRA or 401(k) especially with the same amount of money.
It will give you sometimes double to triple the net spendable income during retirement.
But when you finally pass away, it blossoms and transfers tax-free.
I'm going to share one last little aha, epiphany here.
And then I going to show you how you can claim a free copy of my most recent best-selling
book.
Don't look at what it is.
Look at what it does.
If I put money into an insurance policy and I maximum fund it under IRS guidelines, it
turns into this tax-free cash cow.
Well, I use that for retirement because it way out performs IRAs or 401(k)s or even Roths.
Roths have 2 benefits.
You take after-tax money and put it in there, it accumulates tax-free.
When you take it out, it's tax-free.
The Laser Fund does that.
It's been grandfathered for over 100 years.
But I can put in huge deposits --2 hundred, 3 hundred thousand.
You can do that ino a Roth.
I don't have to.
I can put in 30,000 but if I could've put in 300, I can put in the other 270,000 anytime
I want in the future.
You can't do that in a Roth.
See, people who make too much money can't own a Roth.
So, sometimes, savvy CPAs and tax attorneys call the Laser Fund the Rich Man's Roth.
And I snicker because you don't have to be rich to own one.
You can set one up for 500 bucks a month if you want.
But see, I can put in a large lump sums, I can make up for years.
But if I put in 300,000 one year because I have a banner year and I need 250,000 back
in 30 days, I can do that.
There's no penalties.
With a Roth, you have to wait 5 years until your 59 and a half.
Who wants all of those strings attached?
I can link my returns so that when the market goes up, I make money.
But when the market goes down, I don't lose because money inside of an indexed universal
life contract is not actually at risk at the market.
You participate when the market goes up but you do not lose when it goes down.
And you need to learn about that strategy.
Because it's a game changer.
But at the end of the day, when I finally pass away, it blossoms and transfers tax-free.
So, let me give you a few teasers and you may want to search on this channel for some
related videos about this.
I not only use it for my retirement but I have owned life insurance on my father.
I couldn't on my mother.
She had already had some heart attacks early in life.
She was uninsurable.
My Father in law, my mother in law.
And when they all passed away, I got a huge lump sum of tax-free capital.
The rate of return was far better than if I had been putting those premium dollars into
the best investment account you could even show me.
Likewise, my children, own insurance on me.
If they put money in an IRA or 401(k), I would go crazy.
"What are you thinking?"
If they put $1,000 a month into a million-dollar policy on me and if I live along time, they're
going to have an incredible tax-free rate of return that is better than any IRA or 401(k)
would produce.
But when I die, they have an automatic million bucks tax-free that they know they put into
an a new insurance contract on them and it will generate 100,000 a year of tax-free income,
they would have to have an IRA or 401(k) that produces 150,000.
You pay tax and net the same 100.
Hello?
Are you getting some epiphanies?
every person in our family, when they pass away, we take 20% of that insurance benefit
tax-free and we fund the next oldest healthiest family member.
And our family bank is funded into perpetuity.
We will never run out of money.
And we keep it tax-free.
I've written 11 books.
I want to show you how you can claim your free copy to learn more about what I call
The Laser Fund.
So, my 11th book, we're on our 6th printing.
It's been flying off the warehouse shelves.
It's called The Laser Fund.
It's actually 2 books in one at this side.
It's 200 pages, 14 chapters, all kinds of charts and graphs.
This side is the right brain side about 100 pages, 12 chapters with 62 chicken soup for
the financial soul stories.
You can read both books if you'd like.
It retails for 20 bucks but I want to gift you a free copy.
Go to laserfund, (LASER) laserfund.com.
Contribute a nominal amount towards the shipping and handling and I'll cover the rest of those
cause and I'll pay for the book and fire it out to you.
There's other options in there to learn, listen and learn, watch, and learn.
And be sure and search this channel and subcribe.
And you'll be notified every time I post a new educational video which is almost daily
to empower you so you can become financially independent.