Robert Kiyosakis CPA Reveals the Biggest Tax Advantages of Life Insurance

 From your perspective, what is your thoughts on using life insurance as an asset? You call it an investment. I almost see it as a storehouse to be able to invest in other areas that you've talked about in this book. So there's a lot of reasons for life insurance. It's I don't think there's one just one reason and and You know a lot of people like me. I will probably never borrow Use my life insurance policy for a long. I probably won't. Yeah, okay. I don't need to Okay, and But I'll tell you what some of the great tax benefits are of course is first of all it's Public policy is what allows life insurance all the tax benefits. It's that look We're trying to take care of widows and children. That's really where it comes from and it's good public policy It's not unusual in different countries. Although I think we're a little more aggressive with it than most countries and and But you have of course two types of policies one is a term policy one is a permanent policy. I'll call permanent There's whole life, etc., etc. But it's a permanent and the way I explain the difference is once an expense and once an asset and that's really Somebody once explained to me fact somebody I know I'm sure you know Patrick Donoho. Yeah He explained one day he told he was telling me he goes I said What percentage of term policies are collected? He says less than 1% what percentage of Whole life policies are collected says over 97% I'm going okay So here's what you're going to say from now on Patrick term is an expense and And whole life is an asset because that's the case now if you just want to have an expense then term is fine for you But what I I think there's some really good uses for whole life one is of course is you've got that cashier under value And you if you need that loan you can always get that loan, okay? Another is of course is that it means that If you need to if you want to take care of people when you die That means that you have an asset and you can spend all your other assets and you don't have to worry about leaving your assets and And living less of a life So that your assets can take care of them you can let the life insurance take care of them And I think that's a huge one from a tax standpoint There's no deduction to buy life insurance However Yes, there's no income when you receive the beneficiary gets the life insurance. There's no income Certainly when you borrow it by borrow die There's no income On top of that though if you borrow if you use this collateral because again, you're not borrowing from the policy You're using the the policy as collateral for the loan from the insurance company That's a very big difference and then people know What the reason is important for people is if you let's say borrow from your Roth IRA Mm-hmm the interest you pay your Roth IRA is not deductible because it's not taxable So that's a non deductible interest expense With life insurance though, you're not borrowing from your policy you're borrowing from the insurance company With the life insurance is collateral that means that if you use that money for say real estate or for business The interest is deductible as real estate interest or business interest and so while the the interest income say this is what I love the interest income is tax-free because the policy is still growing and the interest income on that policy if you hold it until you die is tax-free but the interest expense is tax deductible so you actually get some tax leverage here By by borrowing by by by borrowing that money And You don't lose it you don't lose anything but it's but it's a debt like anybody else and you are not paying yourself You are paying the insurance company, right? And and a lot of people mix that up they make it almost sound too good to be true and Usually it's it's too separate. It's like your cash value and your death benefit are growing Pretty much regardless the fact that you utilize your your policy you want to make sure that that activity makes sense as well It's not just all in one box. Sure You are there is a debate and it's interesting because there's not it's like a lot of things in tax There's not like it's not super black and white But you're saying even there's some people that say you have to have a third party lender to have it be tax deductible But you're saying if you can if you can prove that it's business purposes and you're right you're working with the insurance Company you can write off that interest. No, so so here here's the rule and I tell you I was in the national office of Bernstsen Winnie back before was Ernstsen young When the interest deduction rules came out and we actually testified Before Treasury on these interest deduction rules and I got really so I I have first-hand knowledge of how these interest deductions rules work They're they're it's a tracing principle. So you actually any any Loan outside of your home mortgage any loan outside your home mortgage The deductibility of that interest depends on what the money was used for got it Okay, so In this case the reason you don't need a third party lender is because you're not borrowing from your policy You're borrowing from the insurance company and the insurance company is a third party. Yeah You're not borrowing from yourself like you are with a Roth IRA or Roth for own cake Excuse me you Roth for okay. You're borrowing from the insurance company a third party Yeah, I don't think there's any question. It's deductible and I think there's just so much misunderstanding as a relate to that because most people don't need to use language Well, and so they're of course meet people might get it mixed up to say if it's just like your Roth IRA But you're you're totally right. There's a it's not there. So yeah, I don't all like your Roth No, and I again appreciate you writing this in the book and even just your understanding around it because as you know that Sometimes life insurance gets a bad rap right rightfully so by the way There's there's I don't endorse neither to you all the things that happen when people talk about life insurance But it's it can be a great asset. I gotta tell you I think the most creative people on earth besides lawyers are Our life insurance Because they keep coming up with new ways to sell life insurance and it just cracks me up. I'm going oh my heaven, you know Some of these some of these things that they're you that they're saying work That'll work, okay, and so Just because life insurance done me it works. Yeah, so I do have to make sure Particularly some of these more extravagant things. I mean, you know a big big term right now is ppli right Private placement life insurance there are There are situations where that works, but there are a lot of situations that are being proposed by aggressive life insurance Agents that do not work in fact the IRS is going after them. Yeah, because of that same thing with people borrowing money To pay life insurance it it can work based on your situation But all the people that were pitched these sexy illustrations and now with interest rates going up It's like again, it it becomes very problematic Tom. We'll write CPA for Robert Kiyosaki author of tax free wealth And I never forget Robert looked at me and he goes really I said yeah, he goes Whoa the government's greatest power is the power to tax the reason the dollar has value Is because you pay your taxes in it interesting if if you were not Required to pay your taxes in dollars. It would lose its it would lose all this value now Let's get to the worst of it from your perspective. What is your thoughts on using life insurance as an asset? It's fascinating when you write a book and you discover things so you didn't know and what I discovered was business is the number one Tax incentivized investment in every country so the government literally will pay you start a business If you wonder why did Elon Musk not pay tax for 20 years or why did Amazon not pay tax for 20 years? It's because of this