In this video, I'm going to be reacting to one of the three ways to be your own bank by Toby Mathis. He is one of the founders of Anderson Advisors. He has an amazing YouTube channel where he does tax planning, asset protection, and he's got 500,000 plus subs on YouTube. And this video has over 64,000 views at the time of recording this. Real quick, just wanted to say, if you have a video that you want me to watch or review, please tag me, please. please send it to our team. And then the other thing is a lot of you, a lot of you, over 50% of you that watch our channel are not subscribed. And so my ask is if you get value from this channel, if you like our videos, please hit subscribe. And then if you hit the notification bell somewhere on YouTube, I think it's in the upper right, it will also notify you when I'm coming out with videos. We got some very exciting videos and interviews to come, so stay tuned, but you'll definitely want to hit that notification bell. I'm going to jump in, watch his first take when he talks about infinite banking. We all hear about it. Be your own bank. Infinity in banking, whatever, or infinite banking. It's using IUL and whole life insurance. So let's start with the cash value insurance. I'll say this for all the purists out there. If you're going to use the word infinite banking and R. Nelson Nash, he's purely whole life. Now, many people use IUL. I'll talk about it later on my thoughts. I'm curious to hear what Toby's thoughts are. I'll give you my thoughts at the end of this video on my take on whole life versus IUL when it comes to this type of strategy. But there are people that use marketing for both. I happen to know that Anderson, I believe, they're not anti-IUL where some people are. And so that is my disclaimer as he says that you can use both. And a lot of people would debate that, including myself. Vote provision for this is Section 7702. meaning that there's an actual internal revenue code that allows these things to grow. They're available for indexed universal life and whole life policies, for example. This is the classic be your own bank strategy. In fact, when you see this, it's almost always an insurance guy schlepping the insurance. It was popularized by Nelson Nash in his book, and it's legit. When it is set up right, and here's how it works. You get a life insurance policy that is a permanent policy, and you overfund the policy. In other words, you're paying more than just the cost of insurance. So you're putting in more than the base premium and that extra builds cash value. So it looks kind of like this. You have what's called the death benefit and the cash value. And this is the secret sauce. This, depending on the policy, It's either going to grow based off of the stock market or it's going to grow from the dividends that's being created from the mutual company. Whatever, when you buy a whole life, you're getting that dividend and it's growing tax free. So the cash value is growing in a tax deferred or tax free manner because once there's enough in there. It grows tax deferred, just to be clear. And I'm sure he'll say you can borrow against it. That's. tax-free because loans aren't considerable taxable and then it gets paid income tax-free. So that's the whole idea where you can say it's tax-free, but technically you kind of want to avoid those words because it's the reason you want to avoid saying tax-free is someone could cancel their policy 10 years in, 15 years in. If they totally cancel the policy, they gain on the policy. If you just cancel it, you would, there will be some tax owed on that. So that's where that's, that's just like the inside baseball to why language matters. Growing and growing and growing. And then you could borrow against it. And I didn't misstate that. You're borrowing that out. And so the typical situation that people teach is, hey, let's do enough, let's put in money over the years, and they'll even finance the premium so they get a whole bunch of money stuck in that cash value. And you want that cash value to grow, and then you borrow against the cash value. And all that growth, it's growing tax-free. When you borrow it, it's not taxable. And this is where it gets really fun. When you die, that's not taxable either. So you may never pay tax on this. So the money keeps growing as if it was never even borrowed. When you do this loan, for example, I might take this loan out. It might be at 4%, but my cash value is growing at 10%. You're keeping that spread and you're taking this 4%. And what are you investing it in? You got it. You're putting it in things like real estate, your business, other investments. If you have credit card debt. pay that off because chances are the interest rate paid here is going to be less. You're still growing the cash value and you're making the spread. You're the bank. You're your own bank. You get to decide on the repayment terms, whether you're even going to pay it back. There's no credit checks. There's no loan applications, but this is crucial. You need the right type of policy. I see a lot of agents that don't set this up correctly and sometimes they oversell it. They're trying to get massive. commissions, and they're also incentivized to sell a higher death benefit when really what you want is that cash value to grow. This is why our videos, I always joke with people, it's like a lot of insurance people don't necessarily love me. And then obviously a lot of people that think life insurance is a terrible place, scam, don't love what we teach. And so sometimes I feel like I'm in my little bubble with you guys as friends and some others, but it is. interesting because it's like you would think that everyone in the insurance space just loves what we do and they're like a lot of them don't because they feel threatened by us sharing like how things work we have another channel the and asset channel where we break down lots of case studies and numbers and it's like that's awesome unless you feel threatened by that and so i could not agree more that the policy has got to be set up right you got to work with the right type of person someone who's very transparent who's um who you you feel really good in but you understand it as well. You should never do something. that you don't understand. All policies are created the same. So you really want to work with somebody who knows what they're doing. Preferably a fiduciary, somebody who has a legal obligation to put your interest first. So you don't get, you know, somebody that just decides they're going to target you and sell you a really huge commission product. You can usually tell by the CAF surrender value, by the way, you look at those surrender values before you sign that policy and you'll know what they're getting paid because that surrender value, if you had to closed down the policy. It's going to be really low based off of what you paid because you had to pay out a huge commission to the salesperson. So what he's saying is if you were to pay like a $100,000 premium, just throwing out a number, and let's say the surrender value is like $40,000, meaning like there's $40,000 of cash that you could surrender out the first year. You could assume the difference between the $40,000. And the $100,000, so it's $60,000 in that scenario. You could assume that the commission is made up of a big chunk of that. And so that is it's not 100% across the board. It could be half of that and all. But usually the difference in year one is what the cost of the program looks like in most cases. That's where the lion's share is being used to pay the agent. So that's, again, not across the board, but that's a good idea when you're looking at And that's one of the reasons like early cash value policies can be phenomenal, especially if you understand the product. But there's not all incentives in the industry to set that up for somebody. Well, you want to be careful. You want to work with somebody that you trust. All right. That's number one. And that is the traditional be your own bank, infinite banking, whatever you want to call it. It is a section 7702 that allows that to grow tax free. And then if you pay it off when you die from the death benefit, it comes. immediately pays that back. Even if you've never made a payment or you need like a lot of people never pay these things off. They don't even make payments. So you get tax-free money throughout your lifetime. And then when you die, it pays it back and those proceeds are not taxable. So you're getting a pretty good deal. You don't get a tax deduction to put money in, but as it grows, let's say this cash value grows at 10% a year. If it's tied to the market, that's what the market's been about. So let's just say, You know, I think legally they have to show you 7%. So let's just say it's 7%. I know for a fact, I want to give him the benefit of the doubt because it's, I did a video on somebody else that was like straight up wrong, where he's talking about dividends, adding to guaranteed interest, and that's earning over 10%. And so like that's straight up wrong. This I feel like is just an overstay. I don't know if Toby. works directly with this or if they have partners that they refer out but i i feel like the 10 is not a route that i would want to touch with 10 football i've had plenty of videos um around that even with people that are pro iul that would agree with this statement i i've i i we have people on our network who work with very wealthy people and do whole life and iul um and they they would they would not agree with the statement of 10%, but they... there potentially are benefits of using those products mixed. And so it's just not just my opinion. I think even people that are pro-IUL would say because of cost of insurance, because of cap rates, because of other things, to say 10% because that's what the market is, would not be something that I would want to stand by. And I think there would be a lot of people that would be frustrated because over time I could almost guarantee that you will not get anywhere close to that in these type of products. I would say you could potentially say 6%. You could make the argument that the upside with an IUL, with some of the downside that you're taking because it's not as guaranteed as whole life, you could almost bank on getting a 1%, maybe a 1.5% greater return, but you are taking on some things for that. I think that's a very fair statement. If it's overfunded, set up improperly, I think there could be some benefits, but the reason You would take on some of the less guarantees is for that upside. And then a lot of people that want to do whole life, they're like, listen, I'm not trying to make this an investment. I would rather cover my down. I want this to be a solid foundation, and I want as few levers as possible. And so I'm okay with making a little bit less than the potential upside that I could get an index product. 10%, I wouldn't feel comfortable. And I think if Toby really... Doug, Doug in, he, he would probably agree with, with those statements. I'm, and by the way, Toby, if you want to come on, I would love to interview you. And I think there could be some fun collaborations that we could do, by the way, if you want to go see the rest of his video, you can go and let them know that you saw the video from our channel, which means your money doubles every 10 years rule of 72. So let's just say you put in a hundred thousand dollars on policy and it grows over time and it goes up to 200,000. and you borrow 100,000, 200,000 out, well you wouldn't be able to borrow the whole 200,000, it's gonna be a portion. So let's say you borrow out $120,000, you get that out tax-free. When you pass away, that $120,000 gets paid back and whatever the death benefit is, let's say the death benefit's 500,000, that difference is gonna go to your family or wherever you direct it. So it's actually a really effective tool. But again, it's misused a lot. I use these because I want the death benefit. I also want living benefits. For example, if I get a life-threatening disease, I want to be able to access some of that death benefit before I die. I'm also using this obviously for the cash value so I can actually borrow and not have to pay tax on that money. And if I need the money to go into a real estate project or something, boom, I have access to it. So that's number one. If you're a high income earner or own a successful business, you're already creating real value in the world. The real question is, are you keeping that money protecting it and growing it the way that actually supports your long-term goals at better wealth we help people like you better keep protect and grow their wealth through various tax strategies estate planning especially design life insurance retirement planning and even a fractional family office service if you're interested in one or more of the areas we can serve and want to learn more the next step is to book a free clarity call with us click the link in the description or tag comment below to get started back to the video hey I feel like we need to have a celebration because I don't feel like a lot of people talk about the death benefit and the living benefits. And what Toby mentions, he's like he essentially walked back his statement slightly, not fully, but he's just like, okay, don't a lot of people overhype this. One of the reasons I'm doing this is for the protection aspect and then the living benefits, which one of the ways to just say that is all the benefits you get with life insurance, including critical and chronic illness. which in simplified talk is like if Toby or myself or anyone that has these policies, if they were to get like sick or, you know, weren't able to do certain activities of daily living, you could spend down the death benefit before dying and potentially use it for alternative options, living more intentionally with your time on earth. Like it's, it gives you those options. Some people call them long-term care alternatives. I think you got to be careful with just using that language, but that's, that's why they use it as like, Hey, instead of long-term care you could utilize some of these Living benefits and then the people that do long-term care say hey long-term care is a little bit different and also We've we've had videos breaking down that but I just I'm letting you know Like not a lot of people and they're talking about this even mention that and I love the fact that He's even doing a strategy for that benefit. So I wrote a couple things he I think I mentioned that IUL versus whole life I I said what I said about that what what Arnolson Nash in this book said he it's very he's very very clear Arnelson Nash, when it comes to becoming your own banker, is very clear that he likes a whole life. He does not endorse index universal life for the banking mechanism, because in short, some of the upside that you're hoping to get, you take on some more moving pieces. And what I'll just say is if you're trying to build a solid financial foundation, upside should not be a driving factor. It should be stability. And for that reason, I think that's where you could say like, hey, life insurance is not an investment, then why roll the dice? Now, there are people that use index universal life there's people that i've had on that are way more aggressive than i would that i recommend but there they use it they try to like buy into the whole arbitrage thing and on paper it looks amazing and um you know if it works out for them 30 years from now like they're going to be have a lot more life insurance in their policy versus if they just did whole life but but again i i feel like i'm like an old man saying this i've been around the block Even in my short life, and I've seen things not work out, and I just have a feeling that a lot more of that is going to happen. And so all that to say, don't use if anyone's telling you to invest in life insurance, I would hard pass. And if they're using some of those tactics, I would just be cautious. When it comes to overfunding, love that language. We have lots of videos on the power of overfunding, so loved his language there. Not a fan of this 10%, 4% arbitrage. Don't even, you know, don't even think that's even, I just don't, I don't like that math at all. I think there's one thing to say, like, could your policy in an indexed universal life policy credit over 10%? Yes, but is that an actual 10% or is that, you know, what is it after fees and cost of insurance? So it's like, oh, don't, don't love that. But I get where he's saying like there's some policies that credit in the market. There's technically variable policies that could directly play in the market, but I bet you Toby's talking more about indexed universal life, though he didn't go out and say it. I guess he did say IUL and whole life, and that's where I just would not use the 10%, 4% arbitrage. I think the point that he made at the very end when it comes to chronic, they're critical, like living benefits and death benefit, I think The point that I would make if I were sitting across and we're having a conversation is I would say life and if you understand all the benefits of life insurance, you could you could say life insurance gets you a nine, 10, 11 percent value of your portfolio, not rate of return, but value when you look at all the other benefits. And that's like life insurance is a very valuable thing to have in your portfolio. Think of like there's a deep conversation there, but it's like it's very clear that it's not being credited. It's just like there's so many benefits that I'm getting that even that this. maybe small 10%, 15%, 20% part of my portfolio really unlocks so many other things. That's like the people that really are good planners, like they really understand that aspect when it comes to insurance. And then the fact of the matter is that you have cash value that you can utilize to unlock other things. Awesome. But they're usually using life insurance not as a banking mechanism, but as like an and in a portfolio. And then the reality is if you can utilize that capital throughout your life, It's just cherry on top if done well. If not done well, it could be one of the worst things. That's like the double-edged sword of being able to use your money. So that's my thoughts there. He talks about the right type of policy. Agreed. We mentioned cash surrender value. He talked about there's options to never pay off your loan. And some people call this the buy-borrow-die mechanism. And so the idea is every year, if you take a loan against the insurance policy, your interest is going to compound. But your policy will also compound and grow. And so there are people that take out a loan and they're not over-leveraged their policy and they are super flexible. They don't pay back the loan and their policy will very way outperform or not be in trouble of lapsing at all with that and then eventually they'll die. the death benefit, which will continue to be growing up if the policy is set up properly, will... pay the outstanding debt, and then the rest to the family. So to make math really easy is if you have a $10 million policy and you have $3 million of cash value, and let's say $1 million of that is a loan, and let's say over time the interest and all grows to $1.5 million. So $1.5 million of loan, your death benefit maybe starts at $5 or $6 million, but over time continues to grow. So, And let's say at the time of death, you have a $1.5 million loan and your death benefit is started at $5 million and now is at $10 million. What would happen is your $10 million would get paid minus the $1.5 million of loan. So now you would get your family or your beneficiaries or your trust would get $8.5 million income tax-free to that entity. And so that's how that works. Nelson and many other people would highly recommend never creating a strategy where you're not paying back at least the interest. I think I've seen people massively sell these policies with not paying back the loans, and I would say you've got to be really careful. While you can do this, I would be very cautious to do any type of strategy where you're not paying back at least the interest. I think there can be things that compound in a negative way if the interest is at least not being addressed. So that's what I would say about that, but it can be done. And I've known people that they've literally built a strategy where their policies are capitalized super well and they're taking out portions. Maybe their money is tied up in businesses or real estate. And they're not going to pay back the loan until these businesses or real estate are exited. And then when they exit, they now have a place to put that money. And so that's kind of the strategy. And so I know that can be done. The beautiful thing about these contracts is it gives you the flexibility because that's where people will say, like, you are your own banker because, like, you have more control than the person that's working with a traditional bank can't just be like, you know what? I'm not going to pay back this loan for 20 plus years and you can't do anything about it. like They have a lot they could do about it. And he mentioned in the video, like, hey, if you had $200,000 of cash value, you wouldn't be able to borrow all of it. All that is saying is you can't borrow dollar for dollar all of your surrender value. You have to usually leave 95% to 10% in there. Usually it's around 5%. So if I had a million dollars of cash value, I would have to leave about 5% in there and I could have access to maybe 95%. percent If you want to be conservative, just look at 90%. And that explains the whole difference between loan available and cash surrender. And then I love the fact that he's talking about death benefit and living benefit. So yeah, if you want to watch the rest of his video, he talks about two other ways to be your own bank. I think it's, again, gimmicks are getting people to click videos. It's getting people to at least open their eyes. but at the end of the day, We want to save more money. We want to make sure that we're protected throughout the time. We want to increase our control. And at the end of the day, it's just giving life insurance is protecting you, increasing your pool of capital, and allowing you to use that pool of capital to make other moves. And at the same time, that life insurance unlocks other things in your portfolio. It should not be the end-all be-all for all your money. And for some of you, it could just be a bond alternative. And for others of you that are maybe entrepreneurs, maybe we'll save more money in this system. But it's to build a solid foundation to be able to make moves in other places. And so, Toby, hats off to you, man. Again, I would love to do a collaboration and appreciate you making videos like this.
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