All right, guys, I'm going to be reacting to Rockefeller life insurance strategy for tax-free wealth. This is something that has gotten a lot of questions. There's a lot of people that are very interested when it comes to the strategy of like, how do the Rockefellers use life insurance and trust to keep more money, build their wealth? And, you know, obviously the Rockefeller family is very wealthy and they're wealthy for a reason. So I'm going to be reacting to Edward Collins, who has an awesome channel. He's a JD. He's a CFP. He's done a lot of great content. He does a lot of reaction content in itself. So I thought I would react to his content and see how his take is. I think he, in the past, this is my view on Edward, is he's solid. He really understands the tax code and all. And he's been critical of some life insurance stuff, rightfully so, because there's a lot of people that say life insurance is an amazing investment and they'll make bad math. And also, anytime someone's saying that this is the solution to all your problems, run. And so he probably takes very similar takes that I would take in a lot of different places. I'm not sure if he actually does this, but I'm sure that he's working with some people that do this strategy. And then the last thing I want to say is this concept of the Rockefeller idea is very much taken from my friend Garrett Gunderson in his book, What Would the Rockefellers Do? This book has sold a lot of copies for a good reason because it's a great concept, and they break down how the Rockefellers have done this. If you're someone that's like, I've not read this book. and want to get this, I have a bunch of copies because I actually wrote the forward to this book and I would love to get this in your hands. And if this is a strategy that you're interested in learning more, we can get you this book. We can also get you a course and do some other good things as well. So there'll be a link somewhere down here and I'll give you more information at the end of this video. Without further ado, let's jump into Edward's video and see about his take when it comes to Rockefeller life insurance strategy for tax-free wealth. Follower number two is what you need to really focus on first and foremost, the concept of protection coming first. That is the thing we need to make sure that we're doing and engaging in. There are a few different things that the Rockefeller family has done and continues to do that focuses on this protection coming first ecosystem. The first is the strategic use of permanent life insurance inside of the trust ecosystem. The Rockefellers do utilize this concept of permanent life insurance inside of the trust. And they do that because of the nature of what life insurance is. So life insurance is not an investment alternative. It is a risk mitigation tool. This is why I get into some online debates, if you will, with insurance agents who post on social media, because oftentimes they're talking about life insurance being a great tool for wealth creation. I could not agree more. Insurance is a great tool for wealth preservation. You have a lot of individuals out in the ecosystem selling things like IUL, like index. Before he gets into this, I could not agree more. Insurance fundamentally is a contract between you, the individual, and an insurance company. You've got to make sure that the insurance company is solid. Whole video on that. You have to make sure that the contract is set up solid. Because at the end of the day. It's you are entering into a contract. All the things that we're mentioning are a part of the contract. You got to make sure that that's solid with a company that's reputable. And so it's important that you understand that. And I also love the fact that you're talking about preservation. I think anytime you get someone that says this is going to make you a ton of money. I just reacted to a video on someone that says life insurance is going to get you over 10 percent return in whole life. And I'm like, this is why this is why people like Edward is saying like I get into. arguments online because of statements like that. That's not even true. But that doesn't just because those aren't true, just because you're calling those people out doesn't make it doesn't make you anti insurance. It just is like, no, that's not why you should have insurance. Universal life. And I fundamentally have a challenge with that approach in this methodology, because oftentimes those types of life insurance policies are being sold and structured incorrectly with regard to this particular. It doesn't mean that you could not use certain types of life insurance policies for this outcome. It's just the vast majority of them that I've personally seen are not structured the correct way. Life insurance, imagine that it is an account, right? And every time you make a premium payment, it divides that premium payment into two separate accounts within an overall account. Account A is the account that handles all of the expenses that are associated with the life insurance itself, right? The actual risk expenses. God forbid if you died, you have to have money in order to pay out claims, if you will, for that policy. The carrying cost of the operations, if you will, of the life insurance company that's issuing the policy, right? All of the expenses that are associated with the life insurance, a part of your premium payment goes toward that. Now, if you have temporary insurance or term insurance, 100% of your premium goes towards those expenses, right? There's nothing left over. It all goes towards that. In a permanent policy, whole life, variable life, universal life, variable universal life. indexed universal life, those are all what are referred to as permanent life insurance policies. And the difference between a term policy and a permanent policy is there's a second account into which your dollars go. And that is some form of a cash value account. Now, I personally dislike the use of the phrase cash value because I believe it sort of makes the buyer of the insurance or the individual who's considering purchasing insurance, believe too heavily in the fact that that is their money. The cash value is just another account that is set up by the insurance company. And quite frankly, the insurance company is the one who owns that cash value account, unless you do something very specific to pull that specific dollar out of the insurance contract. There's a certain way you can access the cash value directly, but doing so, actually has the potential of voiding your insurance agreement, right? So you no longer have life insurance. So I don't like the use of the term cash value, but that is literally what it's called, so that's what I'm calling it, right? But I want you to understand something, that that is an account that is owned by the life insurance company. And you have access to it for different reasons. You can leverage it in different ways. But if you think of it as your money, I think you're already down the wrong path with regard to this. Yeah, two things I'll say. So he mentions about IUL. I agree with his take. I'm not anti-IUL, but when it comes to something like this setup, like when you talk about the Rockefeller strategy, and I'm not sure if he's going to go into like multiple generations, the waterfall effect and all, like you want something that's going to be around and you want as few levers to be problematic as possible. And IUL has a lot of potential upsides, but they have more levers. And so when you're coming, when you're doing multi-generational planning, it just is like, how do you remove all very, as many variables as possible? So Don't disagree with his take on that. When it comes to cash value, he's correct. I actually think you can make the argument that like dollars in cash value versus dollars in a cash bank account, that would actually be an interesting video to make because cash value is not, I mean, you have cash surrender, so you could just take that money out. Like there's a point where it's like, I wouldn't recommend this, but if you just want to take the money out, you could surrender your policy and get that money out. and a lot of times you... every policy will have their cash surrender value. And so anyways, I get that. But yeah, cash value is technically not cash like in your bank account. I actually think cash value is more valuable than cash in a bank account if you understand that, because it's not just access to capital that you have access to, but there's other things that are tied to that cash value number. And so I think there's actually something to that. And so on one side, Edward's 100% correct. And I also think that there could be a deeper dive on the difference between cash and cash value. Cash has certain benefits. The list may be shorter. And then cash value, there's probably some negatives, but there's a lot of other benefits that are tied to having cash value versus cash. That's something I won't go down a rabbit hole, but there could be a part two to this whole video. And if I get the opportunity to sit down with Edward, that might be something that we do a deeper dive on. But why is this important? while life insurance policies have a very specific provision under the internal revenue code that govern them. And if they are structured in the right way, the money that goes into that. I use if set up and use properly, and he says it's structured the right way. So I like I like the jargon here at cash value portion of the insurance contract can grow. It could grow based on a variety of different things. It could be. The underlying performance, if you will, of the insurance company and how they choose to invest the dollars. It could be the insurance company sets it up in such a way that gives you an option with regard to how those dollars get invested, based on a certain list, if you will, of investment alternatives within that agreement. Regardless. As long as it's structured the right way and you have not done things to otherwise knock you out of this particular classification under the Internal Revenue Code, as that cash value grows, you do not pay any income tax on it. That's hugely powerful, right? It's a tax deferral mechanism. And so long as the money stays in that insurance agreement and never really gets withdrawn by you truly, then there's no taxes on it ever because the death... benefit proceeds of life insurance also are not income taxable to the beneficiary. So a life insurance contract has a lot of tax benefits that go along with it. And here's the interesting thing that the Rockefellers really leveraged to the nines, right? They definitely did it like awesome. They structured their life insurance in such a way where the death benefit was not necessarily as high as it could have been, but the cash value accumulation within the policy was. All right, a couple things I'll just say. 100% agree. Life insurance is a contract. Love that language, Edward. Grows tax-deferred. Love that language. The death benefit gets paid out income tax-free. I love how a lot of times people, and they're like, they steal your cash value, and the death benefit, it's like, well, the death benefit should grow over time. And that's actually really beneficial when it comes to tax code because from a tax benefit-wise, it all comes in income tax-free. If you have problems when it comes to estate planning, you obviously want trust and all to help with the estate plan tax. But then they can borrow against it, which is not considered income. And so some people call this like a rich man's Roth, which may or may not be politically correct. But it's like that's the idea of this because you can stuff a lot of money in and you get a lot of the similar benefits to a Roth. Just reacting in real time to this, you're totally right. You're maximizing the cash. Value benefits and you're minimizing the death benefit this but your death benefit has to be greater than your cash value And so this picture while it's illustrating a point is not accurate Your death benefit has to be greater than the cash value to make it, you know tax tax-free and to make it insurance So that that's the point I want to make is sometimes I think people hear that and They they might think like your death benefit should be like just right above or just right under your cash value And that's not how it works. You're still optimizing it really, really optimal. But sometimes that still means you get hundreds of thousands, if not millions of dollars of death benefit, depending on how young you are, how healthy you are, how much money you put in. There always needs to be something like a difference, right? Your cash value cannot equal your life insurance because then the IRS. So he said it, just the illustration was mixed up. He treats that as a different entity. They don't treat it like life insurance anymore. They treat it as something called a modified endowment contract. There needs to be maintained. A corridor of insurance risk. It's called the corridor of insurance specifically. And so long as there is an amount, a difference between the amount of cash value that's in the policy and what the ultimate death benefit is, as long as there's a difference here, a certain corridor, then there's not any income taxation on the growth, if you will, of that cash value account. But what it is... And the key is to optimize it where you're right at that corridor, like you're right at that MEC limit. if you want to optimize for cash. That's the key to getting maximum flexibility, great cash value, and an increasing death benefit. Insurance company will permit many to do is they will issue you a loan guaranteed by the contract. So you're essentially encumbering the contract and getting a loan from the insurance company. Now, what a lot of insurance agents will do is they will describe this as you borrowing money from yourself. That's just not true. I understand the sales technique behind it, and I understand why insurance agents talk about it that way, but it's not your money. You're not actually borrowing your money. You're borrowing money from the insurance company. Now, if you structure it the right way, you can actually accomplish a lot of great things, and that's what the Rockefellers did. They structured their life insurance in just the right way so that the death benefit is pretty low, the cash value accumulation is pretty high, which means the cost of insurance, the portion of your… premiums that get paid every period, whether it's monthly, quarterly, annually, whatever your premium payment period is, the portion of your insurance premiums that's going towards the cash value account is much higher. And the portion that's going towards the expenses associated with the insurance contract is much lower, right? That just means more of your premium payment is going towards the accumulation of a cash value account against which you can leverage a loan from the insurance company. You can borrow money. And the secret ingredient to loaning or borrowing money is that borrowed dollars are not taxed to you. So you can put money into an insurance contract, allow the cash value account to accumulate over time, and given enough time. you may acquire or accumulate, if you will, a large amount of cash value. And the insurance company may permit you a certain percentage, if you will, of that cash value's worth. They may give you a loan equivalent to that. A lot of times it's 95% or more is usually what you have access to. So if you had a million dollars of cash value, you would have access to 95% of that to use in a loan against the contract. Right. So whatever that particular insurance company's... policies are with regard to their loans. Now, protection coming first is critical because what happens was the Rockefellers understood that if we put money into an insurance contract, at some point in the future, not only does it create a protection for my ability to generate income, right? Because if I die, my insurance policy will pay off a death benefit that is not taxable to the recipient, right? It's an income tax-free situation. So it can replace, if you will, might. individual ability to generate income, right, to help my family on a forward-going basis. But while I'm alive, I could also borrow from that insurance company policy. And that borrowed dollar doesn't get income tax to me either. Maybe I pay that back. Maybe I don't. But if there's a scenario where I do not pay and I still have an outstanding loan from the insurance company, my death benefit is reduced by the amount of outstanding loan, which is not taxable. That's why this is so powerful, right? It reduces our exposure to the tax ecosystem that erodes the dollars that we're working hard to create. And that's why Rockefellers leverage this. The other thing is that there's no qualification to borrowing the money, right? You don't have to qualify to a lender to borrow the money. It's just by contract, you have the ability to borrow based on whatever the cash value is that's accumulated within. And that's why some people call it your own bank because of that. You know, you don't have to like justify. I love what Edward's breaking down here because it's in such a non-hypey way is exactly what I'm trying my best to teach here, where it's like, listen, it's not an investment. It's a it's preservation. It's protection. And why it's so powerful is it protects you. The foundation of your a lot of times in trust gives you access to use that capital to do whatever you want to do. But at the end of the day, no matter what this happens over here, as long as the contracts are in place, it's going to ensure that even if your money, if you use it over here and it does not turn out, you're still going to have a death benefit that's going to be able to get paid on to the next generation. And that's like worst case scenario. Best case scenario is the things that you're using your policy for actually increase to the trust and to your wealth and all. And so it's just like it's one of those aspects. I love the non-hypey nature. I wish more people understood this because I'll have people that are going like, I don't, I don't get like, how does this arbitrage and all these things? It's like, if that's what you care about, this is not the strategy for you. Like you could still do arbitrage and other things. This is at a foundation. You don't, you don't necessarily want to arbitrage your money or, you know, as it relates to the foundation of your, your house, you know, it's just like, that's not arbitrage and foundation don't necessarily go hand in hand. And that's where, unfortunately, I think a lot of people, you know, get them mixed up. because they get excited about some of the features and then they might overhype some of the features. But in the process of overhyping those features, they almost like downplay or put a shadow on the strategy in itself. Policy. So as long as you're paying your premiums and the policy is performing, it gives you the ability to have access to capital, which you could use that money for anything you wanted to. You could use that money to buy a business. You could use that money to buy real estate. You could use that money to invest in your existing business to create another stream of income or to support your business during... a growth phase. I mean, there's lots of ways you can use this. Again, I've been called like an anti-insurance person by a lot of insurance agents. It's not because I'm actually anti-insurance at all, right? I actually think insurance is a great tool. I just think that the way a lot of agents sell it is as a tool that it isn't. It is not an investment alternative. It is specifically a risk mitigation tool. It has other benefits, right? And then if you structure it the right way, you get those benefits. But here's the kicker. Like the way I just described structuring it, the least amount of death benefit with the maximum amount of cash value, wouldn't it be interesting to know that that actually results in some of the lowest commissions to the insurance agents that there are? Listen, I'm an unapologetic catalyst, but it's interesting to note that people who are selling it to you are not necessarily incentivized financially to sell it to you the right way. Now, there are a number of actually good, ethical, good insurance agents out there that do structure things the right way. By the way, if you I could not agree more with everything that he's saying. And if you have a policy that you're like, I'm not sure if this is set up properly, we do free policy reviews where we show people exactly what they have. Lots of people that come to us, we're like, hey, you have a great policy. Probably more than often we go, hey, this is how it could be optimized with your current company or here's what's going on. And because a lot of times people are watching this after they got set up a policy and they're not sure if it's optimally set up like Edward is saying. This is why I'm spending so much time on this aspect of it because this is critical to the Rockefeller method, but if you do it the wrong way, you can get a really bad result, right? Because you can get a policy that has too high of a death benefit to too low of a cash value accumulation, which just means it will be very difficult or a very long time from which you'll be in a position from which you could actually borrow against policy. Not borrow from the policy, right, because you're not actually taking money out of the policy. You're borrowing money from the insurance company, and they are essentially guaranteeing that loan to you with the policy itself. There's a lot of other nuance on it, and I have an entire video on how life insurance works. And if you haven't seen that, definitely be sure to jump into that video. I have another video on the Rockefeller method specifically, right, and how the Rockefeller method is utilized specifically with regard to insurance concepts, right? So I dive much deeper into that environment. So. If you haven't seen that either, go ahead, jump into that. The other thing when it comes to protection is not only do you want to protect your ability to generate income for the family, you also want to protect the assets from all of those enemies at the gate, right? The creditors, the litigants, the opportunists who want a piece of your pie. And the way you do that is through that layered entity structure that I talked about, right? The real wealth matrix is the ideal hierarchy of ownership because it literally incorporates that layered entity structure. We use, again, trusts, holding companies, operating companies. Now, it's important to understand that there is nothing in the law that says what a holding company is. That is a term of art. What that means is essentially when I'm saying the words holding company, I'm referring to a business entity that you have created for the purpose of owning other things on your behalf. It could be intellectual property. It could be other businesses. In theory, it could be financial assets. There are lots of different ways to have that structure. An operating company, again, nothing in the law that says what an operating company is. It's a term of art. When I use that phrase, I'm referring to a business entity that you've created to engage in commerce, the buying and or selling of goods and or services with the public. And when you structure things the right way and have this hierarchical ownership structure, it gives us the ability to have both inside-out liability protection along with outside-in liability protection. The other thing we want to make sure is that it is structured in such a way to prevent your wealth journey from being disrupted by things like lawsuits, right? The right infrastructure safeguards against that. Creditors, the right infrastructure safeguards against that. Divorce, the right infrastructure safeguards against that, right? The Rockefellers have a plan in place that incorporate all of those different aspects into the outcome that they're looking to perpetuate, which is generational wealth. So having that right infrastructure makes that a possibility. You got value from this video. All right, so Edward, 10 out of 10, man. I really, really appreciate your video. I think you were spot on. A couple of things that weren't mentioned in this video is this idea of the waterfowl method, of saying like, as a Rockefeller family, like as kids were born, they would get life insurance that would tie back into the trust. I think that's also really important because no matter what one generation does or what one person does, it's almost like a reset and it ensures that every year, every generation, that you're... the the trust and the family wealth gets larger and larger and so i think it's one of those you could say is that efficient if you put all your money in x asset it could be blah blah blah blah and i think at the end of the day it's like if you think long term enough you gotta you gotta like plan for like a certain generation to just not be that great and instead of wiping out the entire family wealth what if they just you know slowed down the growth but it was there's a there's a reset or that the trust could continue to grow. And so that's something that's really key. You don't necessarily need a setup like this to have a version of this. There's a lot of people that buy life insurance on their kids. My daughter has a life insurance policy on herself. And obviously with not proper trust setups, I can't necessarily ensure that her kids' kids do this strategy, but it's at the end of the day, it's like we're getting things started. And then obviously operating companies, holding companies' trusts are all designed to further protect, but also ensure that things continue to happen. I mentioned this earlier, but if this book, What Were the Rockefellers, is something that you're interested, we'll have a link down below on how you can get this copy and a course that Garrett himself did. Garrett's been on this channel multiple times. He's been at almost all of my events that I've put on for insurance professionals. He's a great friend and very much want to support this. I actually wrote the forward to this version of What Were the Rockefellers do. So pumped about that. And yeah, if you're someone that wants us to review, wants to learn more about this strategy, please let us know. Let me know if you have any questions. We'll have links down below for reviewing and for having a conversation with our team. And if you're someone that's like, hey, I would love Caleb and Edward to have a conversation, please let me know that there's a possibility for us to sit down sometime maybe in the near future. And if you have any dying questions of this would be a great thing to ask, please let me know and we'll make sure to make that happen. All right, take care.
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