How Does Infinite Banking Work, Step by Step?

My name is Caleb Guilliams. I'm the founder of betterwealth.com. I'm also the author of The AND Asset, and I've helped set up over a billion dollars worth of life insurance. And one of the common questions that I get is, "Caleb, I want to learn more about infinite banking or whole life insurance. Where do I start?" And we've made thousands of videos on the internet as it relates to how infinite banking works and all the common questions that come up, and it can be very overwhelming to where you start. And so that's why we've put together this three-hour ultimate guide to answering that question.

We want this to be the most comprehensive guide on the internet. And so we've taken some of our most popular videos and some gems that may have been missed if you're just coming to us, and we've put it all together in one resource. The premise is this. The premise is giving your dollar multiple jobs. In typical financial planning, we are taught to give your dollar, or either invest it or spend it or pay off debt. And I want you to take a step back and say, what if you didn't have to choose anymore?

What if you didn't have to choose between someday in the future, like someday in retirement, or now in the present? Like maybe you're an entrepreneur and want to invest in your business. We have been taught that you either have to do one or the other. And I'm telling you, you don't have to choose if you understand the process of this game.

And so the overview is this. Number one, you are your number one asset. And what do I mean by that is the most important thing as it relates to your money and what works is making sure that you're clear on what you want. At our company, we use ROR, and ROR stands for return on result. What do you want? And we ask questions like, what would you do if money wasn't a problem? What would you do if you were financially free? What does financial freedom look like for you? But it's really, really important that we get clarity on where you're headed.

The second element is making sure that we can optimize your money. Making sure that we can optimize your cash flow. Make sure that we are looking at where your assets are being held. Let's look at where your debts are and let's ask the question, are these aligning with what you want to accomplish?

Now, the reason why I love the AND Asset is the AND Asset is a special type of life insurance contract. Now, when we think of life insurance, we think of an insurance company where we put money and they insure something like our house, our car, or if we were working and we wanted to make sure that we weren't leave our family high and dry if we passed away, we would get insurance. And I need you to put that to the side, because what we're talking about when we're talking about overfunded whole life insurance is a special type of contract with a special type of company. The company's got to, you have to have ownership stake. Okay? Meaning, just like a credit union, you get to be part owner of this company and they pay you dividends. They pay you interest for being owner.

And the special contract that you have with this insurance company is saying, we're going to get as little insurance as possible and maximize the cash. So just know that this is very rare. There's not a ton of people that are teaching this, and there's a lot of reasons why and I have other videos, but it's a very special type of insurance company with a special type of contract. We're putting as much money in and minimizing the insurance cost and maximizing the cash, and that's allowing us to really optimize the amount of money that we get to store.

When we do that, your money is going to grow for the rest of your life. I'm going to write the word lifetime, because think about this. If compound growth, if we're going to commit to a compounding strategy, we need to commit to it for the rest of our life. Most people are saving their money till maybe retirement and then taking that money out. They're killing the goose that's laying the golden egg.

And I just want you to imagine for a second if you could take a dollar and that dollar could work for you the rest of your life. Think about the power of that. Think about if it could grow without taxes, if it could grow without fees, if it could grow without worrying about losing your money in the market. If it could even grow while you use your money at the same time. I think you're starting to see the power of this. But we're pretty obsessed at BetterWealth to take every dollar that you're going to save and commit it to lifetime growth.

Now, this is where it gets good, because the second element is taking that same dollar and being able to use that money. Your greatest financial need is using money throughout your life. And whether you're a business owner, whether you're an investor, regardless of who you are, using your money is your greatest need. And how many people out there have actually taught you better ways to use your money?

Now, a common question that we get is, "Okay, Caleb, how could your money grow and you use it at the same time?" And I want to break down this idea of controlled compounding. Essentially, what the AND Asset allows you to do, and this is why I'm such a huge fan of overfunding life insurance, is when set up and used properly, you're able to collateralize your money. You're able to, as your money grows the rest of your life, you're able to borrow against it.

Now, a common question that we get is, "Caleb, why would you borrow your own money?" And that question is actually wrong, because you're not borrowing your money. That wouldn't make sense. You're borrowing the insurance company's money, allowing your money to grow the whole time. So, think about this. Your money is growing the rest of your life. Whenever you want to use it, you can borrow against it and pay it back. Borrow against it, pay it back. Borrow against it, pay it back. All the while, your money's growing.

But imagine this. What are you using it? You could be investing in real estate, paying off debt, and buying your business. Regardless, we are now showing you how to use a dollar in two places rather than one. Again, I have more videos that break down the importance of growing your money and using

...it. But this is incredibly important and this is what separates this from all other investments because all other investments I want to consider, think of them as OR assets. Your money's in the market or it's not. It's in your savings or it's not. It's in this strategy or it's not. But we're not able to do both. Okay. So, lifetime growth, use of money, we can do both.

The third element that the AND Asset allows you to do, and I'm writing this down, I'm not a huge fan of the word retirement, but we are in a retirement crisis. Most people don't have a fraction of the money that they need. And even with the money that they have saved up, the money is not going to show up powerfully in the income stage of their life. We've worked so hard. You've climbed the mountain called retirement planning and now you're going down the mountain and so many people are going to run out of money and outlive their money, and that's one of the most common fears of retirees.

And one of the cool things about the AND Asset strategy is it gives you so many options. It gives you the ability to spend more of your stocks if you're in a stock account. You're able to use a pension maximization strategy to get more income. You're able to use the AND Asset itself to take income out and because of the controlled compounding element, you're able to get more money. It's able to be safer and we're eliminating taxes from the equation, allowing someone to be more safe and just more secure and more comfortable in retirement. And again, I have more videos that break down how powerful the AND Asset is in retirement.

Now the other key benefit is once you do this, if all we did, by the way, is grow your money, be able to use it and have a good retirement strategy, it would be amazing. It would be like, yes, why I would totally save my money in this. But what makes this so powerful is that same dollar, that same AND Asset dollar is protecting two things. Number one, it's protecting your ability to continue to earn money and protecting you becoming your greatest asset. Think about that.

If you passed away, if something did happen to you, if you got disabled, if you got super sick and you lost your ability to save money, all this goes away. Your ability to save money, your ability to retire, your ability to continue to invest, that all goes away. And so it's really important that the AND Asset is able to protect that. But it's also protecting your money to begin with. So many people don't have certainty as it relates to their financial plan, their financial strategy. And so the same dollar that we're doing all these fun and exciting things is protecting the most important asset and also protecting our money in the future and making sure that it's protected.

Now the fifth element of the AND Asset strategy, and this is one thing that I want everyone to get and I think is so important and I missed for over two years teaching this. I would talk about the benefits. I would talk about compounding but I didn't understand one of the most key, most important elements of the strategy is being able to save more. Now, I totally get this if you see that and it's like, I don't fully get your point, Caleb, but think about this. If we're able to help you double your savings or triple the amount of money that you're able to save, and that money that you're saving is going to grow the rest of your life, think about the power of that.

Now, most people can't save 20 or 30% of their money just because they have things that they need to spend their money on. Think about the power of this. As an entrepreneur myself, I am able to save a significant amount of money and I know that yes, that money long term is going to do amazing things. But if that was the only reason that you told me to save that money, I wouldn't because I have things that I need to invest in now. I want an emergency account. There's so many areas that I want to make sure that I'm not losing all my money or lose money prematurely.

The fact is, and the reality is, if we can help people control and use their money effectively throughout their life, they're able to double, if not triple, the amount of money that they're able to save per year. And I'm telling you, the volume of savings is what makes us so special. The volume of savings is what makes us so special. And so, we are able to help entrepreneurs and families save a significant amount more money, show them how to use it throughout their life, but they get all that money growing for them the rest of their life.

And I will finish this off by saying, and I'm drawing this number one asset, is the reason why the AND Asset strategy is so close to my heart and why I'm dedicating my life to sharing this with people all across the country is I believe that when set up and used properly, yes, your money is going to grow the rest of your life. Yes, you'll be able to control it. Yes, you'll be better off in retirement. Yes, you'll be more protected. Yes, your money will be more protected. Yes, you'll be able to save more money. But you're able to show up more powerfully in your life.

And that's super important because when you have a system set up and when you do proper planning and when you have a solid foundation, you are able to show up more powerfully in your life today. And that mindset of knowing that you have this thing taken care of, that mindset of proper future planning and proper strategy is what really makes me come alive because I've seen people that get this and they just come alive and they do more in business and they are better investors and they're better at home because they have all this in play. And so again, yes, there's a lot of moving pieces going on, but I want to challenge you on this one thing. It's easy to get into the idea of comparing this to other financial products. And really the only place that we can really compare this is where you're storing your cash. So it's really a savings account because an investment, it's an OR asset. A savings account is even an OR asset as well. And so how I like...

To summarize, this is, there's really four steps in how we help someone. Step number one is get clarity. And this is infinite banking, by the way. Like if you get these four steps, you're going to be super well off. Clarity on where you want to go. Find the money. Save more through efficiency. Put it into a policy that's properly structured, that's maximizing all these benefits, and know that you're going to get compound growth the rest of your life.

And then get ultra clear on what uses that you want throughout your life. And I'm telling you, the fact that you can use your money and save it at the same time, may not make a radical, it may not make a huge sense today, although it could, but over a long period of time, you're going to get both the eighth wonder of the world, compound growth, and what I call the ninth wonder of the world, total control, on your side. And together, there's no better way to save and use your money. There's no better way to store capital. There's, quite frankly, no better financial strategy that you could have in your life.

All right, guys. I'm going to answer 10 infinite banking questions in less than 10 minutes. The clock starts now. And the first question that is asked is, what is infinite banking? Infinite banking is essentially using an overfunded whole life insurance policy to save money in. Your money will grow the rest of your life. Instead of going to a bank or paying cash for things, you're borrowing against your policy to buy things, hopefully assets and not liabilities, but whatever, assets or liabilities, your money will continue to grow in your infinite banking policy, and you'll get other benefits because you have permanent life insurance that has more than just the ability to grow your money. So that's infinite banking.

Is infinite banking a scam? No. But it is sold, is overhyped. If the policy is not designed properly, it can be a horrible thing. And I would say majority of people that are pitching life insurance, beware. And if anyone's pitching you life insurance as like the best thing since sliced bread, or that it's an investment, run, because life insurance will never outperform good investments and it's just not how it's intended to be. And so that's what I would say. It's not a scam, but a lot of people sell it in a scammy, salesy way. And if it's not designed properly, it's not going to serve you well.

Question number three, is infinite banking only for the rich people? There's people that disagree with what I'm about to say. I think unless you can put an initial $10,000 into an overfunded life insurance policy or infinite banking, you should not do it. There are people that say, "Hey, you can put $100 a month," and all that stuff. And that, it's true. There's certain fixed expenses that are the same for the $100 a month versus a lot more. And so I've just found, in the people that I've interacted with, it's like a lot of times if you don't have an initial 10,000 at least to put in, it just doesn't end up performing the way that, you know, a lot of people have expectations, because they're like, "Oh, I can use all my own bank and stuff." And it just takes a while.

And the best thing that you can do is instead of focusing on infinite banking is make more money and get more money that you can save. Once you can save in at least $10,000 initially, preferably ongoing, then infinite banking is a great place to store your capital and use it. It's, again, not an investment. And there's pros and cons to what I just said, but for the vast majority of people that believe that they are their greatest asset, it's an amazing strategy. And so no, it's not just for rich people. Some people might say an initial $10,000 means you're rich, and then again then I guess it means for rich people. But that would be the cutoff.

So 80% or more of people that can't fund this properly, yes, I would not say that infinite banking is for you. I would recommend you buy term insurance and save up money in a savings account. And once that gets saved up into a, you know, six months of emergency, then we could talk about potentially, you know, substituting infinite banking policy instead of your savings. And especially if you have more than that, I think infinite banking should be something that you should look at as a part of your portfolio.

Okay, I got 7 minutes left. Question number four, what type of life insurance do I use for infinite banking? Whole life insurance is what I would 100% recommend. If you're going to use your policy and borrow against it and as a foundational asset, whole life is the way to go. There are people that are saying, you know, IUL, and there's pros and cons to IUL versus whole life. And what I will say is if you're looking at life insurance as a place, as like more of an investment, a Roth alternative, IULs have some pros to it, and if designed properly, I think they could potentially outperform whole life.

Notice my words, potentially, because I don't know, there's a lot more levers, and IUL is definitely sold as the more sexy vehicle, but as a result there's a lot more things that could blow up on it, and in most cases you have a lot less cash value early on. And so I would prefer to have more cash value, more control, less levers and variables that could go right and or go wrong, especially since life insurance is not an investment. So why would I want to, you know, put a lot of things on the table or risk a lot of things for something that's not an investment? That's just my two cents.

But technically, if we're going to use the words infinite banking, I think majority of people would agree that if you're going to use infinite banking, you should use whole life. There are people that say IUL is better. I think it is a mistake, but I'm not anti for everything, and we can have another video breaking that down.

How many infinite banking policies can I own? I know someone that owns 39 infinite banking policies. I do not own 39. Really what limits your ability to own policies on yourself is how much death benefit you have. You're worth so much economically, and so the insurance company doesn't want you to have an incentive that makes you

...worth more debt than alive. But if you keep under the your human life value, you can get a ton of small little policies. And it's based off again the death benefit is the thing that is really determining how much how many policies you can have. But you can have other policies that aren't even on your life. And so there are people that own tons of life insurance policies on kids, business partners, and whatnot, and they just control the cash. You just need some type of insurable interest. But no technical rules to how many policies you can own.

That's why when someone says, "I have multiple policies," they usually start a policy, reverse engineer it for what they can save today, and then as they're making more, they open up new policies, and as long as they're not worth more dead than alive, they can do that.

Number six, how to take a loan from a life insurance policy. You essentially borrow against the insurance policy. And there's multiple different ways. You could call in. There's some companies that are more advanced, you can take a loan online, but essentially it is you put money into a policy. You have the cash surrender value and you can borrow up to the cash surrender value.

And so in the first couple years, it's less than what you've put in and then there's break even and then you can borrow against more than what you put in. And you're not borrowing from, you're borrowing against. And I wonder if that, yeah, someone's going to ask me about rates, so I'll wait to answer that question.

Number seven, can I use a policy to pay off my mortgage? The answer is yes. You can use policy for whatever you want. I would highly discourage that, and I don't think that would be a good use of your money. Even if you could get a cheaper rate, I would not want to give up control and liquidity of my money to put it into something where I could get a mortgage for 3, four, five, 6% loan. I am not a huge proponent of using a life insurance policy or infinite banking to pay off your mortgage. When I have more time I can break down why that is.

Number eight, do I have to pay taxes when I borrow against my life insurance? The answer is no. You don't have to pay tax or income tax on what's considered a loan. That's one of the powerful things is when you take a loan, it's a loan. It's exempt from income tax. And so that's why you can have your cake and eat it too in a sense, is your money is in the policy giving you benefits, you also have access to it and you don't have to pay taxes.

Number nine, what are the interest rates? The interest rates that you're earning in the policy are anywhere from 2 and a half, 3% upwards to, we have policies that earn 5% from a standpoint of internal rate of return. And so that's what you can earn. And then when it comes to borrowing against, we're looking at, you know, anywhere from mid 3s to high fives or sixes and anything in between. I'm a fan of using a third party lender. So what does that mean? Is I could usually get a cheaper access to money because I'm using a bank to take a life insurance policy that's pretty much like bulletproof as it relates to collateral.

Got two minutes left. Number 10, how do I design this type of policy? What kind of insurance companies offer this? So, if you're going to use whole life insurance, which I would recommend for this, you want to work with a mutual dividend paying life insurance company. There are about 10 out there that you could use. We have access to all 10, but we use about five. And you've got to work with someone that knows how to do that. So, obviously, I'm biased. You could work with us. There's also many other people out there that can set this up and coach you throughout the way.

The most important thing is you want the policy to be set up properly. This is super super important. And then you want to work with a team that can coach you and make sure that there's ongoing support because this is kind of an outside the box way of thinking about money. And you might have questions about like, you know, the following year I can put this much money into it. Should I? And there's so many nuances of this. And so you want to work with a company that is mutual that can allow you to set this up.

And then the real technical way that you need to design this, cuz I have a whole minute left to explain this to you, is you want to make the base insurance premium as low as possible. And you want to maximize what's called the paid up additions. And different companies have different wordage for this, but whether you call it PUAs or you just want to maximize the cash through other riders, sometimes you have to add what's called a term rider into this mix to allow you to get as much cash value but as little base premium as possible. And any type of way of designing that is going to be good. Whether it's a really heavy front load, which we're a big fan, like putting a lot of money up front and then maybe tapering that down throughout the years or just doing consistent cash flowing.

I've never been more convicted in life insurance and I've never been more convicted by saying it's life insurance is an AND, it's the foundation. And so because of that, why would I want to create any more variables to my policy? I'll go as far as to say there are probably some IUL carriers, and Chris you're probably watching this, which is a great friend of both Dom and I, like there are probably some IUL carriers and contracts that will outperform whole life. I would not be shocked by that and I know many people that are doing IUL the right way. They're putting a lot of time and energy into it and I wouldn't be shocked at all if an IUL contract outperformed whole life, not just from an income standpoint but from a cash value standpoint.

That doesn't make it something that that's why everyone should do it. That actually is like my exact point of like that's not why I have whole life. That's not why I use life insurance. I use it as a place to store and use my capital. And because of that, I want as few variables to mess with

...that as possible. So while the IUL has the upside, it also has a heck of a ton of potential variables and downsides. And for those reasons, when you start putting 15, 20, 30, 40 years, I don't necessarily want to trade the potential upside with the potential levers on the back end. And then the last thing I'll say is I'm also giving the benefit of the doubt because we know some phenomenal people that represent IUL. For every phenomenal human being that does IUL, there's a lot of people out there that are selling you something they have no idea what they're selling.

They're not going to be in the business three years from now and you are literally sold a contract you don't understand. It's not serviced well, and IULs unserviced are a train wreck. I think everyone would probably agree with me on that. Whole life not serviced isn't great, but it's not a train wreck. IUL not serviced well could be a huge problem.

Yeah. For me, one of the biggest factors that made me be like, "Aha, I need to be more from an agnostic standpoint of like it's just a tool at the end of the day," was there's a very, very smart mentor of ours that we work with that he works with family offices and he sells both whole life and IUL. And what he does is he shows it from a very conservative standpoint. So in whole life insurance, you can show what happens if you reduce the dividend and then what is the end result by doing so. In IULs you can do the same exact thing. You can reduce the overall rate of return and you can say, okay, if we reduce this, what reduce the caps, what is essentially going to happen to this policy?

Will it lapse? Will it collapse? Here's what the cash value looks like. Here's the worst case scenario. Are you okay with that? And then what he does is he allows the client to decide what they would prefer.

And I really resonate with that of like not selling anybody on one thing or the other, but educating clients on the risks in whole life, the risks in IUL, allowing them to understand it fully and then allowing them to make the decision accordingly. And the problem with the industry is not many people actually understand how IULs work, and I have Chris, you know, to thank for this, to really opening up my eyes around that it is an option strategy and there is a lot more levers that are moving. The video that he did with you at the house was unbelievable. That should be another video that you should put in the link, because I think that was a great video, by the way, of explaining par rates, cap rates, the disadvantages, what could potentially happen.

And for me, people in the space, all they're selling is arbitrage and this massive upside potential and uncapped and that there's no risk on the downside and that you can't lose any money. And, you know, there's a really amazing, smart individual out there. His name is Bobby Samson, and I've heard him speak multiple times, and he did a presentation where he showed the projections back in like 2011 of what the IULs were going to do or supposed to do, quote unquote, and then what the actual performance was. And it was mind-blowing how different they were. And it was unbelievable how little less cash value there was from the projections.

So there was today, because caps were astronomically high, caps came way down, option strategy became more expensive, so essentially produced less results. So as a whole, I think it comes back to again is understanding the tool, presenting it correctly, and understanding and asking the question is, will this tool solve the problem that I'm trying to fix? Yeah. And I also want to just talk about this from a standpoint of life insurance.

If people are selling it as like, again, the main it, or like a lot of people, we know some people in the space that are like massive fans of retirement income using life insurance and they're using arbitrage and they have a calculator that, you know, shows you what kind of retirement income you're going to get. And I just look at that and go, there is no shot that that's even going to be close. And that's what I have a problem is, is like I actually believe that this person might believe that it's going to happen, which is even more scary because they are like advocating something that's so not going to happen. Like I am so certain that it's not going to happen that it's like it's kind of frustrating to be like, okay, we're intentionally using majority of whole life for examples because I actually think it's a more conservative way to just talk about life insurance in general.

And then you have other people on the internet that are just doing something that if you know anything about this game, you just go like, I can't believe that's what they're actually teaching, and they're using it as a way to, whether it's prey or whether it's aggressively sell or whether it's just ignorance. It's just one of those things where it's like, don't elevate life insurance to be the thing that's going to solve all your problems. And probably the biggest mistake that I made early on is, as big of a fan as I am in life insurance, I don't think all your money should be in there. I think that there's also wisdom in seeing it as an asset class, seeing it as a, you know, be diversified. Maybe it's a massive part of where you're storing your money, but if all your money is in one asset, whether it's real estate, crypto, the market, life insurance, it's probably not a great idea.

And while life insurance is way better off than so many other asset classes, a lot of times it's not going to translate in the efficiency of your money. And so those are just things I just want to caution you. If you don't understand it, if you can't like whiteboard it out and actually understand how all the things work, I would just really encourage you to maybe be less aggressive, maybe fund less money into it, dip your toes and make sure you really understand, because at the end of the day, there's a lot of people that are selling it that don't understand, that may think they understand with. Yeah.

And I think there's actually a lot of really cool things that are happening in the industry as a whole for a consumer protection standpoint. Whole life has been around for forever, right? And so there's numbers to back up that it works and that it's safe and

There's guarantees involved with it, so you know what you're getting. IUL is relatively a new concept, and because of that, there's been a lot of changes that have happened because people were overselling it. People were getting lawsuits. People were losing a lot of money in regards to it. Policies were lapsing and it caused a lot of friction in the industry as a whole in regards to it. But at the same time, the internet ramped up the amount of sales that were happening in regards to this product. So it just caused more problems within it.

And some of these insurance carriers were also being very deceptive and not telling the whole truth and putting bonuses on that were projecting higher returns than they really were going to. And it just caused a big disadvantage to the insurance industry as a whole. And what the insurance commissioners essentially did when they came in is created AG49 and B to essentially help out with this IUL raise, which meant that they couldn't project higher than a certain number, to show more conservative numbers. And I think that there's something that just got put in place or was about to get put in place to where it mimics more of like a UL interest rate as well, which I think is great for the industry, for putting the ceiling down again on the IUL craze to make it more realistic of what it actually was meant for.

Yeah, because IULs, illustrated wise, look great, but they really look amazing when you take income because of the arbitrage. Yeah. And so just be aware of that. But let's talk about where ULs are amazing. Well, the income piece is something to be careful of too when you start to look at it, right? Because somebody told me once, which was amazing, that life insurance is meant to have expectations, like risk expectations on it, right? Managed expectations. Thank you. That's exactly what it was.

And you can't manage your expectations very well with an IUL, especially if you look at the 2011 to 2021. If I thought I was going to have a million dollars of cash value in today, but I only had $400,000 of cash value, well, how did you manage those expectations? Not very much, right? So now you have to put in more money or, you know, get double rate of return somewhere else, right, for your income and lifestyle that you're looking for. And then on top of that, the interest rate environment increasing, the variable loan rates are going up.

And so when people start taking distributions and their loan rates are going up and their cost of insurance is also going up, there's no protection loan on these policies, there's a chance that these policies could lapse, starting to use it for retirement. And if you're in retirement and your policy lapses, you're not going to have this massive tax bill as well. And so I don't think people are really tuning into a lot of these moving levers at the retirement piece either. And here's the other thing that's like the dirty secret: is very few people are actually using their policy for income. Like that's how it's sold, but how many people do we know that are getting their monthly check from their whole life or IUL? It's being sold that way, but there's not a lot of people actually using it that way. I know that that might sting, but it's just the truth.

We're going to be looking at four policies. The first policy is going to be fully base. There's a lot of people out there that say life insurance is a terrible place to put your money, and we will show you why they are 100% right. Then we're going to show you a 30/70. We're going to explain what that means in a second. Then we're going to show you a 17/83. We'll explain that in a second. And then we're going to do a 10/90, which a lot of people on the internet are like, 10/90s are the best.

We're going to look at the pros and cons of every design and you will be a life insurance guru at the end of this video. And whether you're an adviser, an agent, or whether you're in the space seeing, is this policy right for me, hopefully this video is very educational. And this video would not be possible without the AND Asset and my partner here, Dom. So thank you for being here, man. Yeah. And I can't wait to be a guru after this video myself, cuz I learn something new every day. And so this is going to be another one of those days.

I'll also say that we did a video like this a couple years ago in what we call now the dungeon. It was literally like a closet that we put some lights in. And so hopefully you can appreciate the backdrop. And with that, we're going to jump right in to the numbers. So when we talk about 100% base, a life insurance policy is built using really three type of components. If I'm going to simplify it, component number one is the base. This is what is like the foundational aspect when you look at life insurance.

Then when you look at PUA, that's when you get early cash value, and also in most cases PUA is totally flexible. And so you get flexibility, early cash value and better long-term growth. And then you could add a term rider which just allows you to fit in more PUA to not MEC and make the contract taxable. In this scenario, we're just looking at 100% base. We're not looking at PUA or term. And as you can see, we're showing $50,000 going in. So $50,000 going in and a cash value of zero with a $3.9 million death benefit.

So first year, we've put $50,000 in and we have $3.9 million of death benefit to show for it, but we have absolutely zero cash value to show for it. On year three, you've put a total of $150,000 and now you finally have $25,000 of cash value to show for it. You can see the death benefit pretty much stays level. You can see that it continues to grow. This break even is year 12, meaning that we have more cash value. You can see here you have more cash value, $624,000 of cash value, and you've put in 600,000.

And so it takes 12 years to do what we call capitalize. Your death benefit is a little bit higher. It's 4 point, well, we'll just say $4.3 million. And you can see, Dom, why a lot of people are like, life insurance is a horrible place to put your money. You've put in $100,000. You have nothing to show for it. You have a death benefit that

...matters to some families more than others. But overall, you can see why this is not very attractive. And very few people online would be like, "Yeah, I love that. That sounds amazing."

Yeah, I'm starting to become a little bit more mature in my walk, I would say, with life insurance. I say that from a faith standpoint, because I have very strong relationship with Christ. But when it comes to my walk in the insurance industry, I've kind of flip-flopped back and forth in regards to how I want to talk and position about life insurance and the cash versus the death benefit. And I would have demonized something like this very, very, very heavily early on in my career. And now I'm from the camp and understand that this isn't necessarily good or bad. This just has a specific purpose.

And this specific purpose potentially is focused on the death benefit for someone like an estate plan or that wants a permanent death benefit for as much death benefit as possible. But if you were on this channel and you are subscribed to the BetterWealth channel, odds are you are not wanting to look at the death benefit as your number one priority and goal. Now you understand that it's important and it's a value add to your life passed down from a legacy perspective. But you are somebody that wants to live an intentional life today while you're alive and to use the cash value for other purposes to build wealth.

Yeah, I think that was well put. And also, while you're watching this, make sure to take notes because we're going to be comparing year 20. Because I think there's wisdom in looking long-term, but not super long term. So like never look at an illustration over 50 years because at the end of the day, I can guarantee you, which is a dirty word in our space, but I can guarantee you that the illustration is not going to be anywhere close to the projection. Your cash could and death benefit could be higher than what your illustration looks like or it could be lower.

But it's one of those things where there's wisdom in looking out but there's also wisdom in not looking out too far because a lot of times someone can suck you in by saying, "Oh, look at 40, 50 years," and there can be a lot that happens in the next 40, 50 years. And I would never do something for a 50-year outcome and if that outcome didn't happen the way I think it was going to happen, it would ruin everything. And that's just something that we need to be careful when we're looking long term to understand that time is a factor.

Yeah. I would say the main reasons why is the economic environment changes from year to year, right? If you even just look a year ago, the interest rate environment was an extreme low. We're going to talk about how the interest rate environment has impacted the overall whole life insurance industry and the insurance industry in general. And typically when the insurance industry is suffering from a lower interest rate environment, they can't produce as great results in their investment portfolios. So their dividends have to be smaller. And therefore, when the interest rate environment is higher, they can produce greater results which can produce a higher dividend.

And so if interest rates stay up high and keep going higher, these actual performances will be better than future, right? And that's why if you actually look at a lot of the illustrations from way back in the day, they were showing a projected number and they're actually higher than they were actually projected, which is great. I think that could be a pro and advantage. And also, insurance companies are going to change their investment portfolio and what they're investing in. Some will invest in more riskier things or more invest in bonds and things will change based off of where they think that their dollars are best used. And that could change today as it could change 50 years from now.

Just like for you, what you're investing today is going to change 50 years from now. I think it's also fair to say that anything can change, but we're showing illustrations at a pretty low interest rate environment. And so overall, these projections are conservative. It may be worse, but there's a good chance that they'll be close or better performance in the long run based on the time that we're running these illustrations.

Yeah. So, what we also like about this in general though is there's a really good likelihood they'll at least be kind of close because there's a guaranteed piece into it, that in whole life insurance that you don't get with other insurance products. And hence why we show a lot of examples with whole life because one of the core elements that we talk about is life insurance shouldn't be your investment. And so if we're going to show numbers, let's show something that's going to be somewhat more accurate than a potential projection using arbitrage. And so that's a whole another video.

But you can see over year 20, because we're going to look at the four policies and look at year 20. If we look at year 20, you've put in a million and you have $1.4 million of cash value with a total death benefit of $4.9 million. So, as you're watching this, make sure to take note. $1 million contributed, 1.4 million of cash value, and $4.9 million of death benefit.

To summarize this, this fully based policy is not something that we would sell a lot of. It's not what a lot of people would be raising their hands, but you can look out even after 20 years. You could make the argument that life insurance would be a benefit for your portfolio. You have a permanent death benefit of almost $5 million that would get passed on income tax free and a nonvolatile, non-correlated, safe asset that has special tax advantages. So, you can see where even if someone sold this, they would say, "Okay, over long term, this is a good policy." Anything else you want to say before we jump on?

Yeah. No, I think what you said at the very end is like it may not be the sexiest thing or the desired result, but it is a result that still can produce fantastic results. Okay. Now, we're going to look at a 30/70. And now it's my understanding, Dom, that we're not using the term rider here, but we are using PUA and base. Correct. Okay. And so, when I say 30, we're saying that 30% is the base and 70% is what's going to the PUA. And you'll see in this example, you'll see a couple differences.

And so instead of first year having a total goose egg, you have $33,000 of cash value versus zero. And you have a total death benefit instead of, you know, 3.9 million, you have a death benefit of 1.2. So the big difference is the trade-off of permanent death benefit versus early cash value. And that really comes down to when you're using paid up additions, you're going to see that the death benefit is going to increase more significantly long term. But early on, the initial death benefit is a lot smaller.

Yeah. And of your $50,000 premium, just think of it, it's got to go somewhere, right? And that's just saying a percentage of it, 30% is going to the base, which is cost of insurance essentially. The other 70% is going directly to cash. That's why you can see that the 33,431 is close to about 70,000. Now, there's a PUA charge up front as well, that actually gets smaller as time goes on after year 1, but you can see if you did the math, 33,431 divided by 50,000 get you probably right under 70%. Right?

And this has a break even of year 7, which again, break even means we've put in $350,000 and we actually have more cash value to show for it. We're going to see at the end of this video that break even is not the only factor that you should care about. We're going to show you at the end a policy that breaks even earlier and a lot of you would choose a different policy. It's kind of like the hook to stay around. Because a lot of times people come to us and they'll be like, this is all I care about, break even, because that's what they see on the internet.

And again, break even matters. If you cancel this policy you actually have more money than what you put in. That's awesome. But break even doesn't necessarily tell the whole story. So in year 10 we've put in half a million. We have 580 of cash value with a death benefit of 2.4. You can see that it's grown.

And then when you look at year 20, you have put that million in and you have 1.6 million of cash value and a death benefit of 4 million. So if you compare that to the base, we had 1.4 million of cash value in the fully base contract with a death benefit of still 4.9. So in the fully base contract you have a higher death benefit still, which is a value, that's an asset, but overall the cash value is more than 200,000. You have way more flexibility, meaning you don't have to, in the fully base contract you have to pay the base contribution until your policy is capitalized to give you options. Here the base is 30% of 50 which creates more flexibility and you can see that you have early cash value where after year 1 or two you could very much pay the base in different type of ways.

Yeah, and a really smart play is even though the base is 30/70 versus the other one, 100% base, and the death benefit here is, you know, a third less than the other one, a really savvy strategy that we can do is we can put a 30-year term insurance on yourself to cover yourself for the separate death benefit and capitalize on our cash value a whole lot sooner. And then when that 30-year term essentially is non-existent, your death benefits will be pretty close to the 100% base policy and this type of policy. That's a really good ninja trick.

All right. Now, we're going to get into 17/83. And if you are OCD, this really bothers you. Why couldn't we do 20/80, dog? Why couldn't we do that? Companies. Sometimes companies be like that. The reason is for this company, the most efficient design that we could do for this age is 17/83. So 17% is going to base, 83% is going to PUA and some type of term rider.

Yeah. Well, with this policy, the 17% is actually going to the base and the term rider, which is why it is so funky, is essentially the term rider's in there and then the term rider component makes the, in the previous one there was no term rider. So we're able to get a cleaner number, right? And so what this is really representing is the actual contribution that you have to make early on. Correct. So, it's one of those, I appreciate you mentioning that it's a combination of base and term, but what we're saying is those have to be paid early on to make sure that the policy is in good order. And you'll find that after year one, you could easily do that even if you couldn't do out of pocket because you have enough cash value in the policy.

So, we're looking at $50,000 going in, you have a cash value of 40,000 in the first year, which is awesome. And with a total death benefit of 1.2 million and you can see that this looks slightly different and it's because of the term rider. You can see that this breaks even in year five, making this break even 2 years earlier than the 30/70. The year 10 death benefit is 2.5 million with a cash value of 600,000, which overall the cash value in both, this 600,000 is $20,000 more than the year 10 example for the 30/70. And if you look out over year 20, you've put in a million, you have $1.6 million of cash value with a death benefit of 4.1.

And so overall, this is more attractive from a flexibility standpoint. It's more attractive from an end cash value standpoint, but it's not as extreme from the 30/70 to 17/83, but there's a little bit of flexibility. And for people that are looking at this, you can see a theme. It's like, hey, if death benefit is not up there from a standpoint of like, hey, a permanent death is really important, you want flexibility, you want long-term growth, usually in many cases, if we're sticking with the same company that you like, lowering the base creates more flexibility and long-term growth.

Yeah. And Caleb says the word flexibility, I want to just kind of reiterate in the basic formality of it. You have a total amount of premium that you have the ability to contribute, which is $50,000. Based off of the IRS, the IRS will say, "Okay, this much death benefit, you can put in this much money at your ceiling." And then based off of the insurance company, they'll say, "You have a minimum amount that you're required to contribute." And in that very, very, very minimal base policy, it was about $8,000 was the

minimum that you had to contribute year after year. And then the maximum was 50. So, we essentially have a window, a flexible window of contributing $80,000 all the way up to 50, which is great for entrepreneurs and business owners and people that cash flow varies because you may have a great year one year and not a great year another year. And it gives you that ability to contribute in that window.

Yeah. And I think that's really really important because life happens and we want to make sure that we can maximize our ability to save, to compound and control our money, but we're not creating something that's actually going to be a pain in our side in the future. Yeah. And then in the 100% base policy, there is no flexibility at all. There's no window at all. It's just, you just have a floor and a ceiling that are the same, which essentially was $50,000. Yep.

All right. Now, we're going to look at a 1090, meaning we're looking at 10% base and term. In this scenario, it is a 10% base with a 90% that's going to the term and the PUA. This is why he's the expert and I'm the co-pilot. And so in this example, you're going to see you're going to have earlier cash value, but you're going to also see that it looks a little bit different than the examples earlier on. And it's because the company that we showed originally can't do a 1090. Like it's my understanding that it would create a MEC for their guidelines and as a result making the life insurance taxable.

And so we actually am switching different companies and you'll see the pros and cons. But I think the caveat is normally if you are with one company, the lower the base, the better. But if you compare company to company, there may be other companies that outperform, as you'll see, if even if they're not a 1090. That's a great way to explain it.

Okay, so now we're jumping in. We're going to say, okay, this is a 1090. So you're going to put $50,000 of premium in the first year. And boom, you got $45,000 of cash value, which if you remember is way ahead of the other examples. And your death benefit doesn't even go above a million, which, and again, a lot of people, this makes sense. Earlier cash value earlier on, death benefit is 847,000. We're all good.

This break even is in year, whoa, it's almost in year four. Can someone donate $130 to this? It would be in year four, but technically this break even is year five with $256,000. And so if you compare it to this policy up here, this also breaks even, but 1090 actually has a little bit more cash value early on. Okay? So it has a little bit more cash value early on. You can look at year 10. You've put in, you know, $500,000 of premium, you have a total of 581 with a total death benefit of 1.88 million.

So, this is a great policy. Like, just want to point that out. Year 20, you've put in a million dollars of premium and you have $1.4 million of cash value and $3.2 million of death benefit. So, I want to point out a couple things. You know, people will come to us and all they care about is, hey, I want break evens as soon as possible, or I want the earliest cash value early on, and you can see where the 1090, even at a different company, it does that. I mean, you have earlier cash value, you break even the same year as the 1783, you have $6,000 essentially more cash, and it performs well.

But I want you to remember, at year 10 you have $581,000 of cash value and in year 20 you have $1.4 million of cash value. At year 10 your death benefit's 1.8 and in year 20 death benefit's 3.2. And so we're just going to look at this other company that doesn't give you as early cash value. But if you look at year 10, you have $600,000 of cash value, which, that's a difference. That's a $20,000 difference with a pretty different death benefit outlook, a $2.5 million death benefit, and a year 20 you have $1.6 million of cash value with a permanent death benefit of 4.1.

So the end result is, we're not saying that one design is better. I would never say that a 1783 is the best policy design for you because we're going to have another video that we're going to show you what's called a frontload. And if you are sitting on a bunch of cash, there might be some amazing examples for you to actually not even do a policy design like this, but frontload a policy and there's a lot of benefits and pros and cons. What we're going to do is we're going to talk about what frontloads are. We're going to show you examples and go through some pros and cons.

So, before we jump in, Dom, what is your initial thoughts around frontloading? Yeah. My initial thoughts are, one, when you showed me this design years ago when I was first getting into the space, I was like, "Wow, this is actually pretty nifty." I was like, "Did you come up with this?" I'm actually curious. Did you come up with this or did you learn from somebody else? Like, cuz we're now innovating around it, but I'm curious where this initial concept came from.

I can't take credit for this, but to be frank, I don't know of anyone else that was doing this before we were doing it. And we actually talked to the initial insurance company that we worked with at the time and we were talking about different examples and they showed an example of like a little bit more upfront and then dropped off the premium, but the premium stayed level. And I was like, "Wait a second, can we like increase that?" And they were like, "Yeah, let's look." And so, again, I can't take a ton of credit for this, but for sure after publishing our videos a lot of people have been kind of copying, which I am a fan of because that means people are getting better policies whether you work with us or someone else. I love that this is becoming more common.

A frontload is essentially anything that goes above and beyond years two on. So if my premium is $10,000 years two on, anything above $10,000 in that first year will be essentially considered a frontload. And we're going to show you three examples what a frontload will look like.

And the reason why we like front loads is because you get a lot of early cash value. If you understand the value of life insurance, you want as much of your money in what's called cash value, which is the cash available in life insurance because of all the benefits. And so overall, it allows you to have that without giving you a large contribution that you have to hit every single year. So you kind of get your cake and eat it too. Benefit of life insurance, early liquidity, but you don't have large base contributions, required contributions ongoing. And so it's the best of both worlds.

If you are not getting a return on your dollars, if it's essentially getting 0% in the bank account, well, actually, now with the rising interest rates, you know, 2, 3%, whatever it looks like at the current moment in time, depending on when you're watching this video, this can be a valuable tool for you to get your dollars to work for you faster. And so I'm also going to share with you why some companies actually perform really well and some companies really don't, because there's some advantages depending on the company. Like Caleb was actually saying at the beginning, he may have worked with a company that was showing the specific design. They didn't even know what was possible. And then you work with another company and they know it's possible, but they intentionally make it disadvantageous because they don't want you to do so.

Why do they not want you to do so? Is because they understand that people that want to do front loads, they're likely going to be able to use that cash early on. There's a lot of companies that really want to hold on to that control of that cash and not have you take policy loans against it. Yeah. There's only about three or four companies that even allow you to do this style of policy. And so with that, we're going to jump into the numbers and Dom, I'll let you take it from here.

Amazing. So, we're going to look at three different designs. They're going to start off small and then they're going to get larger and larger. And so, the first design we're going to look at is a $50,000 front load first year contribution. After that, it's going to be $20,000 going forward. Therefore, after. So when we put in $50,000, you'll see that we have well over 90% liquidity within that first year. So this first year, there's almost $46,000 of cash value and $826,000 of death benefit.

The break even point, which we always like to talk about, happens in year five, where you have more cash value than the money you contributed, which there's $130,172 within that fifth year. And then what is the actual base or required contribution? So the base on this policy is actually 15%. Okay? So it's 15 base, 85% PUA. And so when we're looking at that, that's a $3,000 contribution that you required to contribute after the first year.

So I want to put this in perspective. We're showing someone putting $50,000 in the first year and you have over 90% cash available and then ongoing your actual contribution, your actual base contribution is three grand. So, we are essentially hyperfunding a $3,000 policy to give you early liquidity and a lot of different benefits. And that's why I'm a big fan is if you might be sitting on some money, but you don't know what the future holds. You would like the ability to save $20,000 a year, but if you can't, we want to give you all the options and flexibility to figure out different ways to either fund the three out of pocket or figure out how you can take some of your cash value and fund the base contribution.

Yeah. And this one is cool. But the next two actually, in my opinion, are even sexier. And I will show you exactly why. So, if we look at the second option, we're contributing a little bit more in the first year of front load. So instead of being $50,000, there's $100,000 in the first year and then it's a $30,000 contribution therefore after. So if you look at the cash value perspective of the amount of liquidity you have, it's really easy to do the math with 100,000. There is 93.4% liquidity in the first year, which is insane amount when you look at typical whole life, because typical life you have 0% in the first year.

And now we're looking at a policy where you have access to almost 94% of liquidity to be able to borrow against to use for another activity, hopefully an asset producing activity if you follow the movement of the AND Asset. And when we look at this, the break even point is at year 4. Now I personally, if you're not 1035ing a policy, which is essentially taking cash from one company to another company, I have not seen a policy be able to break even any earlier for at least a consumer. There are other policies like Bolai and things like that, bank life insurance, where you could accomplish it. But when we're looking at specifically for a consumer or a business owner, breaking even in year four is as early as if I've ever seen a company allow that to happen, which is insane when we're looking at actual control, when we're looking at whole life insurance.

Yeah. And just for you, if this is the first time you're watching a video of ours, break even means you have more cash available than what you've put in. It really is one of those metrics that I think more people like talk about and it doesn't necessarily translate to value, but it's like if you're going to cancel your policy, you actually have more money than what you've put in and it's a good way to compare apples to apples when you're looking at other policies. What is the actual base on this? The base on this one is 20%.

So there's two things that I'm wanting to mention with kind of what we're looking at. So the first thing is that there is a term rider that's inserted into these policies. Okay? And when you're looking at most whole life insurance contracts, if you are doing a cash flow strategy, which is there's no front load. So in this one, if it was $30,000, therefore after, if you did like a 10-year term rider, likely would only allow you to pay into it for 10 years. This one has a 10-year term rider as well. As you can see, in the 10th year, the contribution goes from 30,000 to 29,452. And also, if you look at the death benefit, it goes from 2.2 million to 1,66. And the reason that is is because that term rider that's inside of the contract essentially falls

...off. But the really cool part about this is term insurance is essentially a cost with this company. Now, every company is going to be slightly different. Some companies will allow you to buy PUA with that term rider, but this company specific, the term insurance is 100% just a cost. But because we're putting in so much money up front, that PUA is going in so fast that we're able to do a very short term rider and be able to allow yourself to keep paying this longer than 10 years, which is essentially another amazing benefit because now we have a cheaper policy from an expense standpoint and you can still pay into the policy extremely long to allow you to still have the benefits of life insurance.

Yeah. And then the other thing when it comes to the base, I would say this is a small slight disadvantage when we're doing dump ins is when we're having a large, large dump in and we're looking at the ongoing payment. If the front load and the ongoing payment are too small away from each other, so essentially, you know, that's a $70,000 difference between the 100,000 and the 30,000. If those become too far apart from each other, the insurance company's going to ask you to increase the base on the policy. That doesn't essentially make it less efficient because we're putting in so much cash up front, but what that essentially does is it makes it slightly less flexible for you in regards to the ongoing contributions.

And an extreme example of this is if you were to put a million dollar of cash like up front into a policy and then you were like, "Hey, I want to put $10,000 a year after." There's no way that we could do that and for it not to be a MEC. Now, we'll have other videos about the pros and cons of actually MECing a policy. I think there are some benefits to MECing a policy. But overall, if you want it to not become a MEC, meaning you want it to get all the tax benefits of actually being insurance, that what you're saying is the base has some ratio, every company's a little different. And so, if we put a huge front load in, a lot of cases, what requires us to put more money ongoing and that base has to hit a certain minimum.

Yeah. And it comes down to what the IRS is saying, because like Caleb said, the insurance company will allow you to do 50x the base to be able to put in for PUA plus. But the IRS, if you want to have those tax advantages that life insurance has, then you have to stay within the limitations of what the IRS will allow.

So, is it fair to say that this is a $6,000 policy that we're putting $100,000 in a year and giving someone the ability to put up to $30,000 for the first year 2 through 10? Yeah. It's literally amazing. If you were someone that had $100,000 that's sitting in the bank doing absolutely nothing for you and you're like, "Hey, I want to start a policy, but I may be able to save six grand and I may be able to save all the way up to 30 grand." This is exactly what that is, which is insane when you think about it. Yep.

What I love again about this is when we talk about landing a plane, you have $93,000 of cash value. Unless you're leveraging all that money, which we'll go on record and saying like we don't recommend people taking a safe asset and leveraging 100% of it. We have clients that do that and we just again love there to be some buffer. So if you didn't leverage all your money out, and we have plenty of videos that talk about the benefits of borrowing against and how people do that, you have enough cash value easily to do what's called landing the plane and at least come up with a year's worth of base contribution even if you couldn't go out of pocket. But for a lot of people, $6,000 out of pocket would not break the bank in a policy design like this.

Yeah. And this company specifically, they really, really, really are designed for the flexibility to do these types of front loads. Like I have never seen another company in the entire space that this company allows that to happen. I've actually had conversations with other people in the other space with other companies where they intentionally make your base really high and you make your policy less efficient where you have less cash value. So they push you away from doing that.

And this company is big into like infinite banking. They have seminars around it. A lot of the top producers are infinite bankers. And so they understand their audience, which I think is important. And then there's other companies that understand their audience, their target market, and they would say, "We actually don't want that business," and therefore they make it very hard or disadvantageous for you to do that. So all of these rules that Caleb and I are talking about are company specific, and this company just allows us to be extremely sexy.

And one of the things that we're pretty clear on, it is unless we're giving like an update on company to company that year, we're just going to keep the companies anonymous because every company could change year to year on their new products. And so we want this to be as evergreen as possible. And for the last five to six years in business, front loads do exist. Now, how they work year to year could change based on new regulations and interest rates.

So we're going to go to the third and final illustration for this example. And this looks like we're putting $300,000 in year one. $300,000 in year one. And just know that $300,000 like isn't the limitation. Like if you were somebody that had like a million dollars and you wanted to throw that in and then you were like, "Hey, I want to do $100,000 therefore after," that is also very possible. It just really has to make sure that the ratio between the two isn't too far apart.

And you know, this one is only 6x the difference between 50,000 to 300,000. So it's really not that far off. And what we can do is we can just design it in a specific way that fits your needs based off of how much you want to contribute year one versus how much you want to contribute therefore after. And when we're looking at the liquidity, I think you might have done the calculation. I can't help myself. 94% first year liquidity, and this is not a MEC, meaning it's when set up and used properly. You can borrow against your policy, income...

Tax free. Your money grows tax deferred, and it still gets passed on income tax free. Like, that's unbelievable, Dom. 94% first year cash value. Not mecking a policy. It is absolutely insane. And that's why I actually love mecks. And when you start to look at the break even point on this policy, it happens between years three and four, which is insane. You have 396,000 of the 400 you put in in year three and then 458 in year four.

The thing that I really, really, really like about this is when you look at insurance, you start to look at like actual cash flow in dollars that you put in and how much do you get back? I actually think that's a really cool metric to look at. And in this policy specifically, when you put in 50 grand in year two, your policy increases by $55,000. So you essentially put in 50 and you made almost six grand. That happens in year two when you start looking at cash flow. Like that is absolutely incredible. And that doesn't happen really on any other policy unless you're frontloading it. And with this company specifically as well.

The disadvantage again, this policy specifically, the base is now 30% versus 15% in the other one. The reason being is it has to because we're starting to get really far away from each other in regards to the 350,000. But that's still only a $15,000 base requirement to contribute. And to give you the ability to do $50,000 of your ceiling is absolutely incredible. And we have $282,000 of cash value in year one if we somehow couldn't pay our base premium in year two, which gives you maximum flexibility in my opinion by throwing in a ton of money and having the ability to pay using your premium if needed to.

So, I don't get too concerned about increasing the base because typically when we talk about increasing the base, it makes us less efficient. But in this instance, you can see the policy broke even earlier and we had more cash value earlier. So, increasing the base actually was a win in this situation. Well, and if you wanted to actually put more money in, like let's say you want to put 300,000 and then maybe 75, then increasing the base actually gives you the ability to save more, which you could easily argue in the long run is better long term because you're now comparing oranges to apples.

So, it's not as black and white, but what we want to do is give you different examples because what I love about this is like if you understand the power of the AND Asset and giving your dollars more than one job and like protecting yourself, growing your money, controlling it, giving yourself options in the future, it's pretty incredible. Like, one of the biggest biggest problems in life insurance is like early liquidity. This kind of eliminates early liquidity pretty much right in year one because majority, like if you put your money in 401ks and other things, you don't even have access to it. So unless we're dealing with a savings account, which would be ahead in the first couple years, but a savings account doesn't have a death benefit. Savings account doesn't have all the other benefits of life insurance. And this pretty quickly outperforms the savings account and gives you all the other benefits. And so if you started doing like a pros and cons, the pro would be in the first couple years would be slightly ahead. The cons or the pros on the life insurance side would just trounce this long term.

All right, guys. We're going to be jumping into the front-loaded policy and many of you know that this is my favorite strategy for entrepreneurs and investors that are sitting on capital. They love the benefit of life insurance, but their big question is, can I frontload money into life insurance without the ongoing big obligation to funding this thing, get all the benefits of life insurance and be able to use it throughout your life? This policy design, I think, accomplishes many things. It creates massive flexibility, massive liquidity, gives you long-term growth, gives you a death benefit that's powerful and solid. And it kills so many birds with one stone.

Obviously, the caveat is you would need to be sitting on capital to make the strategy worth it. And so this is for the person that is sitting on capital, doesn't want to fund these type of premiums every single year, but can have the means to frontload and then continue to fund at a smaller amount. So the other disclaimer is I'm going to be diving into the numbers, but if you're someone that's like, okay, I don't resonate with $100,000 going in and $20,000 going in after that, that's fine. We can customize a policy for you. And so you might be at $25,000 going in. You might be at $250,000 or a million going in. This is for example purposes only. Don't sue me. I'm literally just going to show you the numbers and how to read this and why this would be beneficial.

And then what I'm also going to do after is I put together 12 benefits. We're going to compare this strategy to a savings account. And you'll see that the savings account wins a couple key battles as it relates to these 12 key benefits, but life insurance overall crushes the savings account. And I want to show you that because I think that will take these numbers and create more clarity. And then finally, I'm going to finish with like a beautiful drawing of mine that brings this all together. If you're an investor, if you're an entrepreneur, this strategy is in my humbled opinion a no-brainer. And hopefully you'll be able to see this. So I think that's all that I want to say as we jump in.

So, we're taking a 35-year-old, we're putting $100,000 in year one. This is the cash value that you would have available to utilize. So, you'll see that $100,000 is going in year one. You have $88,000 of cash value in the first year to utilize the internal rate of return. This is the first video that you've watched. IRR stands for internal rate of return. It's the actual growth rate that your policy is earning.

I think this is really important. And this is the column that really matters as we're comparing rates of return and other assets. This is the column that actually shows the rate of return. And is way more accurate than like dividends and whatnot. Death benefit shows you the permanent asset that you're going to get. And so a lot of people including myself will kind of underplay death benefit because this strategy we care more about

The cash. The death benefit is insanely important to you, your family, your estate, and matters and matters a lot, especially in the future. And so yes, we're not doing this for the death benefit, but the death benefit is an amazing asset, especially if you want to ensure your number one asset. And then this IRR on death benefit essentially says if something happens to you in this year, this is the rate of return that your death benefit will pay, because you've put $100,000 in and you get $3.2 million. And so hypothetically if this person dies in year one, there's over a 3,000% paid to their estate or family. So this is how to read a front-loaded policy.

And the other disclaimer that I want to share is this is coming from our handbook, which again you can get access to in the AND Asset vault, and we wanted to underpromise in these numbers. And so you're going to see that the break even is in year 8. We've seen break evens in year three or four with some of the policies that we design. And you're going to see, you know, initial cash value of 88%. We've seen, you know, in the low 90s as it relates to this. And so again, everyone's a little bit different.

But we just wanted to show you the concept and not overpromise ever, but for you to get the concept. So that's kind of like the disclaimer there. We're also taking a 35-year-old. And if you don't get anything else out of this video, just know that age in these type of strategies only matter for the death benefit. Okay? So, if you're younger, your chance of dying is less. And so, the death benefit is going to be higher in this scenario versus if you're older, the cash value is going to be about the same.

The death benefit is going to be lower because your chance of dying is higher. Okay? So, that's really the big takeaway there, especially since we care about the cash. And the death benefit is a benefit to the strategy, but is not the reason. There are more efficient ways to design death benefit plays if we wanted to fund our estate. So in first year we're putting $100,000 in. Every year after that in this example we're putting 20,000.

So again the front load strategy is great for people that are sitting on cash but don't want to put in this scenario $100,000 each year. One thing I want to note is flexibility is super super important. And this $20,000 is really the max in this strategy. So the $100,000 is year one. 20,000 in an ideal world is the max. If you had more than 20,000 that you wanted to put in this scenario, we wouldn't be able to do it if we wanted to keep this tax-free.

And so the actual premium each year is 6,500, meaning this policy right here is a 6,500 policy and we are giving you the ability to put 100 in the first year and up to 20 each year after that. That creates massive flexibility. And it just overall I think is better for growth, flexibility, and whatnot. So that's what I wanted to point out as well is we're showing 20, but this really creates a lot less of an obligation if something does happen. Also, what to note when we design policies, we want to make sure that the policy is funded well enough that if things happen after that, we would be able to potentially tap into the cash value.

And you can see if we have to fund 6,500, we have plenty of cash early on, unless we lend all of it out, that we would have the ability to fund. And so this is again, I'm just sharing with you why, from a flexibility standpoint, this can be a really great design for entrepreneurs. So we're putting $20,000 in, even though it's not required, we're continuing to fund it each year. You can see in this scenario we break even in year 8, which again is very conservative, but you can see an internal rate of return of 0.5, meaning up until 8 years the cash value has grown at a half a percent each year.

And so if you look at a savings account over the next eight years, would savings accounts beat year 8 in a policy? Potentially. But once you get out to year 10, now you have this life insurance policy that's earning 1.3% tax-free, which most safe liquid accounts aren't holding a candle to. And you can see, you know, in year 12, you're almost to 2%. And now you can see, you know, as you zoom out, we're getting into 3%. And over 30 years, over 30 years, we're showing, and again, this could be higher, it could be lower, we're showing 4% internal rate of return on your cash.

And so the big question again is, this policy is like, if we looked out at the negative of having a frontload policy, it's liquidity. You put your money into this and yes, you have a death benefit. Yes, you have 88% access to cash value, but liquidity, like it doesn't hold a candle to a savings account. But if you take all the benefits of life insurance, the death benefit, the chronic illness rider, all the benefits that we're going to go down in a second, and you know that in, you know, year eight in this scenario, it breaks even and then you get, like later, you're getting an internal rate of return of 2, 3, 4% tax-free. What savings accounts are getting anywhere near that? And remember the tax-free benefit could include, you know, it could make that four to six or 7%.

Point is, remember this is not an investment. This is a place to store and utilize capital, and if we can think long term it can be a tremendous place to store our capital, and the frontload policy gives us the flexibility to do that and have a lot of liquidity in the process. So, that is what I want to show you there. And again, if you want to see your own numbers, go to the AND Asset vault and schedule a strategy meeting.

All right. So, we're going to go through 12 benefits and I'm just going to go through one at a time. We're going to talk about this. We're going to compare a front-loaded, I should say front-loaded, AND Asset to a savings account. And again, savings accounts, lots of benefits, but I believe when we look at this, you'll understand, okay, this is why Caleb is so avid. And people that have life insurance in their foundation,

In their model, in their financial life, long-term, just crush everybody else because of all the multi-uses. So, short-term liquidity, if someone came to me and said, "Caleb, all I care about is short-term liquidity," the savings account crushes life insurance in the first couple years. And I say crushes, I mean 88% liquidity versus 100% liquidity. And so if someone all they cared about was short-term liquidity, life insurance all the way.

Medium-term to long-term liquidity, the AND Asset, the front-loaded life insurance will win, mainly because once it hits break even, you'll see real fast it's growing and building up steam. And the problem with the savings account is there's like no growth. So yes, you have early liquidity. The problem is you don't get much else from there.

This is a big thing that I don't talk a lot about, but convenience. Life insurance is not and should not be sold as like a bank account convenience. I think there's a lot of insurance companies actually cracking down on this. They don't like the terms even like bank on yourself or infinite banking, because they don't want you to think about your life insurance as a bank. I know what we're thinking about. Okay, it's more the philosophy of storing your money and being able to use it. But if someone wants convenience, a bank account wins all day long.

And it's just really important to note that life insurance, while it is liquid, doesn't give us necessarily convenience like a bank. And that is important to know. It should not be a big downplay. But I wanted to point that out, because I think we don't always talk about this enough. And so it's like at a bank you could potentially get your money that day, whereas a life insurance, it takes a couple days to get your money. And so that's all I'll say about that. There's ways to make life insurance more convenient, but I wanted to be as fair as possible to savings account.

All right, growth. I think life insurance dominates the growth category, especially when you add, you know, tax-free nature and uninterrupted. There's no safe asset that comes anywhere close to getting the long-term growth rate that life insurance does when we're comparing it to a safe asset. We're not comparing it to an investment. Private life insurance is going to win. Lots of stories as it relates to the power of a private contract.

Each state is different. There's states like Florida and Texas that are insanely private, to the point with like Enron executives are still getting benefits from their insurance policies because of how private the contracts are. And there's other states, New York, California, that aren't as private, but still the private nature of life insurance, it trumps any type of savings account.

Tax deductible. I'm going to get a big red X for both. Both a savings account and life insurance don't have, you don't get tax deductions going in. And so I just wanted to point that out, that this is not a tax strategy to save money on the front end. And a lot of people will say like, "Do I get to deduct my premiums?" The answer is no.

And my answer to an entrepreneur and investor is get a really good tax strategy, permanently reduce your taxes, and then when you have that money, put it in something like a life insurance policy that allows your money to grow and use with tax-free if set up and used properly. And that is going to be the best one-two punch. And so as it relates to the tax-free growth, life insurance, when set up and used properly, will grow the rest of your life in a tax-free manner, whereas a savings account will not.

Tax-free use. When you collateralize your policy, you can use it in a tax-free way. Whereas again, I know that sounds extreme, but in a savings account, any interest that you earn, you need to pay tax on it. And so it's not a tax-free use, because you're only using your money tax-free, whereas in a life insurance policy, you can use interest in a tax-free way because you're borrowing against it and not taking from it.

Chronic illness rider. This is something that I'm going to be talking more about. There are benefits built into a life insurance policy that says essentially, hey, if something happens to you health-wise, or if there's another benefit called the accelerated benefit riders, where if you like can't perform some of the activities of daily living, like you know, bathing yourself or feeding yourself and whatnot, you could tap into that death benefit. And in that example, $3.2 to a million dollar death benefit, and you could tap into that for care, and then when you pass away, you obviously that subtracts from the death benefit that it pays to your estate.

Again, this is not something, again, no one's raising their hand saying, "Oh, this is why I'm getting this policy." But it is a benefit that we need to talk about, because if you didn't have that, you may have to buy a separate insurance policy, and that's going to be extra money. And so this is just a benefit in the future that my hope is that you won't have to use, but statistically we'll say some of you will have to use that and you'll be glad that you have this.

The death benefit, obviously a savings account doesn't have a death benefit. And again, on this channel, I've underplayed the death benefit a lot, but the death benefit is insanely important and is an asset not just to protect you, but is an asset in the future, giving you a real hard asset to your portfolio. And there are many brokers out there even that will, when you're older, would buy your death benefit essentially if you didn't care anything about life insurance.

And so the death benefit is a huge asset. And when it comes to legacy life insurance, like an estate plan, a legacy with life insurance, i.e. the Rockefeller family, there's a lot of benefits to why people would do this. And so if you zoom out, yes, savings account has short-term liquidity and convenience on its side, but everything else makes it where a life insurance policy, especially a front load, it blows a savings account out of the water. But it doesn't make a savings account bad. So even like myself, I still have quite

A bit of liquidity in a savings account. I use a savings account and life insurance together. It's not either or. They both flow together. If I'm going to take a loan against my life insurance, it's dumping into a savings account. And so, it's just one of those things where it's not one or the other, but long term, I don't want to store a lot of capital in a savings account because of all the benefits that I'm missing out on. And so, I utilize a savings account for convenience, for short-term liquidity. Everything else is in something like a life insurance policy.

Now, you might be asking, okay, why don't I just take money and put it in investments? Like, why do I even care about front-loading a policy? And so this is my lovely drawing. I'm going to give this person a smiley face because he's going to be utilizing the strategy that's going to be a game changer for him or her. So this is you, let's just say, and this is your money. So we just did a front-load policy.

And so let's say the first year you're front-loading a portion of your savings into a policy, and then ongoing you're putting some of your cash flow into a policy like this. And obviously the policy gets all the benefits that I just mentioned. You know, there's, you know, grows tax free, all the benefits that I mentioned. And so obviously you understand that this is key for long term. Also, it's nice that by having this policy you get to protect you and your money. And so it's nice.

There's other benefits, right? But I'm coloring this in red because when we fund a policy, the first thing that I want to make sure, especially when I'm working with investors or entrepreneurs, is I want us to establish some type of emergency fund. This is like, if something hits the fan, if something happens, I want to make sure that we have access to capital and we're not fully tapped out. I personally like to have a year's worth of, like, not revenue, but like expenses. So, as a business owner, I even include a year's worth of reserves as it relates to running the business because I perform better as a business owner. I speak more clearly. I don't have to worry about next week's payroll because I have an emergency fund and a solid foundation.

Regardless of your beliefs on that, it's important to have an emergency fund. And so, when you're funding into something like an AND Asset, we want to establish what is this emergency fund. We want to make sure that this can at least fund a couple years of your base contribution, because again, the last thing we want is a life insurance policy to turn into something that's stressing you out. It should not stress you out. You should be pumped and excited to contribute into the next year. And so the emergency fund is what we're funding here.

After the emergency fund, this is what we'll call, you could call this a lot of different things. My friend Kim Butler calls this the opportunity fund. I love that because this is the money that we can look out for opportunities. We could, you know, give raises. We could give key people on our team raises. We could find investments.

We could create, I'll just put question mark, question mark, question mark. We could do land flipping. We could buy more businesses. We could go and buy a mastermind. We could do education and all these things. And so hopefully all these will create a rate of return, will create a benefit, all at the same time, we know that long-term our money is continuing to grow and be effective.

In this video, we're going to set the record straight on when you should borrow against your life insurance policy versus when you should not borrow from your life insurance policy. This video I've wanted to make for a while. I've shared in a lot of our workshops. We've used this in our training when we train other advisers. But I just feel like there's so much misinformation and misleading information and bad math, and so much people that have the right heart, I think, behind their message, but leave viewers really confused and maybe mislead them.

And as a result, I just want to set the record straight and show you when mathematically you should borrow against your policy and when mathematically you shouldn't. And a lot of people will say, well, this allows you to, you know, literally get rich buying cars. And I'll share with you why they're right on one stance, but I think wrong in another. And this will, again, this will from a mathematical perspective will show you why I'm so avid setting the record straight, because I've gotten so many questions of people that just don't understand the mechanics of how this works. And so that's the hope of this video.

When does it make sense to borrow? This is, I broke this down and I'm assuming the control cost is 5%. Why do I call it control cost? Because this is the cost of controlling capital. We're going to say 5%. I know some insurance companies are lower than this, some are higher, but the point of the matter is if the insurance company says you can borrow against your capital at 5%.

Why do we want to borrow against our money? Well, we get all the benefits of our money continuing to grow. And if we withdrew that money, we couldn't put it back in. And so borrowing allows us to get this compounding machine in the future, ever-increasing death benefit, and using our money. So again, we can say, again there's people that are like, it's free to borrow your money because you're earning in your policy. No, let's assume you're earning 3% or three and a half %. So you're not getting arbitrage, but the life insurance will give you far greater rate of return or benefit over your lifetime than 5%.

That is why you would want to borrow. That's a whole another video, but life insurance, because of all the benefits it's giving you in the short term and long term, are giving you a better result to your portfolio than 5%. I can break that down, but yes, I just opened up a can of worms. You just got to trust me that life insurance will give you a better result short-term and long-term to your portfolio than 5%. That's why in this example, why you would borrow against it, for the future value that life insurance is going to give you. And that's why you'd gladly be willing to pay

5%. Now, if you took a control cost of 5% and invested in a 2% CD, congratulations. You earned a negative 60% rate of return. Now, you might say, "Well, Caleb, my policy grew, and so actually, I made out. I made 2%, my policy grew at 3 or 4%, so I, you know, I actually made out more." My question to you would be, why in the world would you borrow at five, take on an additional 5% control cost to make 2%? Your policy is going to grow regardless. So that activity just got you a negative 60% rate of return.

That's why when I look at people that use their policy to buy cars and they say, "I made a bunch of money because I bought this car." It's like, no, your policy continued to grow. Maybe that was more efficient than paying cash. I'll give you that. But you can't tell me you made all this money buying this car. Your money compounded in your policy, but that activity didn't necessarily put you ahead.

If you borrowed at 5% to earn 5%, that ROI would give you zero. Again, I wouldn't do that deal. If you borrow at 5%, earn 7%, boom, now you make a 40% rate of return on your money. Remember, your money's in your policy. It's going to continue to grow whether you borrow against it or not. So that, at the point of borrowing, that's not relevant.

I don't care about the money growing in your policy. It shouldn't justify the next activity that you do. Your money is growing regardless. When you borrow at five and you earn seven, now you're earning 40% rate of return on your money because, again, you're not using your money. You're using the insurance company's money. And if you, you know, borrow at five to earn 12, now you're getting 140% return on your activity and return on investment. So again, when I talk about people utilizing their policy and giving your dollar more than one job, you can only give your dollar more than one job in a good way if you're actually earning a greater rate of return than 5%.

Now, let me break down the car example again, because it's what a lot of people use. Is it possible that you could earn a greater rate of return by having a type of car, let's say, in a certain profession? The answer could be yes. So, if you're in sales and you drive a nice sports car, you might say, "Hey, this sports car is going to allow me to earn, you know, extra $100,000 because of the people I can impress with the sports car." That's a whole another video on identity. You might have to, you know, follow my personal channel for that.

At the end of the day, let's just say you make more money with the sports car. Then you need to factor this into the equation. If going on vacation mentally puts you in a better headspace so you can make more money, great. Or you just need to admit like, hey, this doesn't make sense from a rate of return standpoint, but I want to live intentionally and intentional living is worth the negative 60% rate of return that I'm earning from borrowing to making. You just have to understand how the math works. We can't lie to ourselves about bad math and think that we're making the right decision. And that's where I'm passionate about this concept.

So, this is the actual mathematical equation. If you want to do this at home, you take the investment, you minus it by the control cost, and then you divide it by control cost. It gives you a number. You multiply that by 100, and that's your rate of return. So, for example, at 12%, say it takes you 5% control cost, divide that by 5%, it gives you a 1.4. Multiply that by 100, that's 140%. That's how you can break down anything. So, you take the investment minus the leverage, divide it by leverage, you get that number, multiply it by 100.

Now, one thing I will say is this equation is not factoring anything about risk. So, a 12% investment most likely has more risk than a 5% investment. So, you have to figure out how to factor that in and everyone has a different risk tolerance. But that's a big mistake that people make when they borrow against their policy. They're just looking at some stated rate of return, but they're not factoring in risk to that rate of return.

Third party lending is something that we use, and why do we use it? It's because if the insurance company will give me a control cost of five and I can earn less, I can control my money at a third party lender that I can give my policy to for collateral and instead of 5%, let's say it's 3%. Then I take the same investment and earn a 300% rate of return. The risk didn't change in this equation. The only variable that changed is my cost of controlling capital.

And so again, as a savvy investor, we should always be looking for different ways that we can improve the deal. And in my case, and a lot of our clients use third party lenders to improve the term of accessing and controlling capital. And as a result, they take the same investment. Instead of earning, you know, a good rate of return, they earn a great rate of return just because they're lessening the actual cost of controlling capital.

So, what are the takeaways? Life insurance is an incredible place to store and use your money. Your money will continue to grow whether you don't borrow, whether you buy cars, or whether you buy assets. It will continue to grow. But we can't say that borrowing from our policy is making us more money. If we're buying liabilities, we can't say that.

Now, if we understand the math and say, I know that going on vacation or buying this liability is not going to make me richer, but it will help me unlock intentional living or whatnot, I'm totally cool. But the only way that we can mathematically get our dollars doing more than one job in the borrowing function is if our activity is earning a greater rate of return than the cost of borrowing our funds. And if that's the case, life insurance is one of the only paper assets that can give you amazing growth and amazing benefits to your policy now and in the future and give you the access to use capital to make rates of return, cash flow. If you can do both, you literally get a dollar doing more than one job.

So here is my beautiful drawing of an insurance policy, insurance company. And before we get into this, because I think it would be really good for you as the real estate investor that's watching this to have some contextual concept to something that you are familiar with, is to think of this more so like a HELOC, a line of credit. And that's really all life insurance is. It's a HELOC on steroids is what I like to call it, because your HELOC, right, it'll appreciate with the value of the home, right, which will give you more access to ability to leverage and use for more properties.

Your life insurance policy will appreciate, but it's compounding from an appreciation standpoint, right? It's going to get guarantees plus a dividend on top of that, which gives you the ability to access and borrow more money to go buy more real estate. And on top of that, it's got a death benefit for you to show up very, very powerfully for your family. So when you're using your funds in a life insurance contract, think of it exactly like a HELOC of the amount of money you have the ability to control, the amount of money you have to go out and use. And when you have interest, the controlled cost like Caleb's going to talk about, think of the controlled cost when that gets tacked on to the overall principal of the HELOC, it's going to work the same exact way in regards to your life insurance contract.

The one benefit outside of that that is massively, massively huge for life insurance is when we're talking about these controlled costs within the HELOC, you are required to pay that interest back or you will default on that loan. When it comes to the life insurance contract, you have maximum flexibility on paying back that interest whenever you want to. I always encourage people to pay it back, just the interest at the bare minimum. But you really don't even have to ever pay it back if you didn't want to. And using leverage in a responsible way is always going to be important regardless of which strategy you use.

Yeah, I love that. Thank you. So what we're going to do, and this is going to be important that we talk this through, we have life insurance over here, we have the insurance company, and then we have the flip. This represents the one-year situation. And again, we'll use real estate because that's easier to draw than crypto. Okay?

So now we're looking at a 20-year what we call IRR. Now, we have many videos on this channel about internal rate of return, but this is the actual growth rate that your policy experiencing, and that factors in commissions, cost of insurance, all the other things. It's actually looking at the true cash on cash growth. So if you understand life insurance, you understand that 4% internal rate of return. That's one benefit out of the many others.

If all we cared about was IRR, you'll start seeing that we're kind of, you know, not using logical sense, because we're going to control money in the future for 6% but we're only earning four. That only makes sense if your life insurance has other benefits than just the internal rate of return. Not only is this compounding, but there's other benefits. And that's really important because the biggest problem that people have is they're like, "Why would I borrow to use my own money?" Well, you're not borrowing your own money, you're using the insurance company's money. But there's other benefits to life insurance. It's not just an account earning a rate of return.

Yeah, no, it's great. And something to point out too in regards to the examples that Caleb is using here is that Caleb is using a 6% loan, which is right around where current interest rates for insurance companies are. They're like right around 5.7%. And he's using a very, very conservative 4% in regards to the life insurance. And I say conservative is because these loan rates are actually higher now than they really have ever been in the last 20 plus years.

And what happens when the loan rates get higher is the dividends also get higher, which means that currently they're getting roughly a 3.5 to a 5% internal rate of return, which means futuristically, because the loan rates have increased and the interest rate environment can increase, you'll likely see a higher than a 4% internal rate of return as well. But he is just showing you a very conservative number right now, right?

And right now a lot of insurance companies are actually giving you a better competitive return than like a third party like banks. But I think third party banks will catch up. And there may be a world, depending on your situation, where you could get a third party to act as the insurance company and get you a cheaper loan rate. At this point, that's all we'll say. We won't confuse you more, but just know that there potentially could be other options to get cheaper access to money while collateralizing your cash value.

Yeah. When he says third party, it just, instead of getting a loan from the life insurance company, you get a loan from a bank or somebody who specializes in doing so. There's a better way to say it. Thank you.

All right. So when we utilize a loan, and I'm going to show a real cash example down below, but this is just conceptual. Let's say we have 200k here, and let's say this $200,000 is cash value, and let's say we take a portion of that. We don't take it, but we want to borrow against our cash value to buy this flip opportunity.

So to do that, we're going to go to the insurance company and we're going to say, "Hey, we have 200,000. We want to use a hundred of that for this flip." And so this insurance company will say, "Okay, we're going to put a 100,000 of your cash value as collateral. We're going to continue to pay you dividends. You're going to still get your life insurance. All is good on the full 200,000." On the full 200,000, but now we're taking the insurance company's money. We're paying them some interest.

And like Dom said, it's an unstructured, you know, loan. So meaning you don't have to pay them that interest. The interest can compound. And there's some reasons why you may want to do that depending on the opportunity that you're going in. But you're going to charge, in this example, 6% to control $100,000, which is six grand. And again, your policy is continuing to earn and all the benefits of life insurance over here. This money is coming to buy this opportunity. We're using a flip to make this easy, and this is going to be one year to make the math easy. But let's say this flip

You take this scenario and it cost you 6%. We call this control cost because it's costing you 6% or in this example $6,000 to control a hundred and that has to be factored in to the investment, because that 6,000 the actual money that you have, you know, that can earn a rate of return. And so if you're paying 6%, if this is the investment and you earn 0% on that flip, not only did you just go through the hassle and give up opportunity cost of what your money could be earning, but you actually made a negative 100% on your money. I.e. it was not wise for you to take that loan and you just lost that $6,000 investment. Now you still have your principal because you didn't lose anything at this point, but you didn't make any money and as a result that you probably don't feel great.

If your investment earns 6%, which some people would be super happy with 6%, in this example, if your investment earns 6% and your control cost was 6%, that essentially means it's a wash. You're 0% on that activity, meaning you went through a lot of work, you went through a lot of hassle, and you didn't really make any profit because of the control cost wasn't higher than the opportunity or investment that you made. Now, on the flip side, this is the kind of math that people use when it comes to, you know, options. So, you got to be careful. And I'm going to show you the real cash example.

But if you made 12% on this opportunity, then you made 100% on your activity in that one year, because your control cost is 6%, you made 12%. And so, boom. Like, that's incredible. And same thing could be true about 15%, that's 150% on your money. And if you doubled, which could be somewhat common in a flip, you get into a flip, you fix it up, who knows, you maybe double what you're getting paid. That would be an example of a 1566% on your money.

And so I think the important thing is you're using your money as collateral. This is your control cost. You want to make sure that the activity gets you way greater rate of return than your control cost. And you also have to factor in risk, because this is a lot more risky than over here. And the idea of the AND Asset being super powerful is you're getting all the benefits of insurance over here. That's going to happen regardless. But when this can be in the green, now your asset got you all the benefits over here and allowed you to participate in some of the profits over here.

All right. So now what we're going to do is we're going to look at this example, but we're just going to show you the real cash example, because sometimes percentages can be misleading. I think percentages make the most amount of sense when you're asking someone like, should you take a loan? Is this activity getting you a greater return than the cost of borrowing? That's like it's easy to kind of conceptualize that. But when it comes to the actual dollars and how it flows, I have this down below and I'll explain this.

So in this $100,000 deal over one year, you are controlling $100,000 with 6K. So actually when you put in that real estate deal, you're putting in 106,000. 100,000 is the insurance company's. The 6,000 is your control cost of controlling that, but you're still on the hook for 106,000. And your policy is continuing to grow like it's never been touched. And then assuming a 12%, you're making $12,000 of profit. Well, actually $6,000 of profit, but on the flip, you get a check for $112,000.

So that's amazing. But if you want to pay back the loan, you have to pay back the control cost. And then if you want to pay back the collateral, you actually would have a $6,000 profit. So in this example, if you only earned 12% over that one year, your insurance is doing its thing. And because of the insurance, it created an opportunity for you to have an additional 6,000 that could go to a savings account. You could reinvest it or you could buy more life insurance.

There's multiple different options that you could do with this 6,000. But this 6,000 is literally created out of you leveraging your AND Asset. That is great. I think that was a good example and just in a simple way, have 100,000, it earns 12%, you make 12,000. That 100,000, 6% control cost, you have to pay 6,000. 12,000 minus 6,000 gives you a $6,000 profit. You sell the property, the property you sell for 100 grand, you pay back the policy plus the $6,000 that you made from the cash flow or whatever else it looks like.

Hey, it's Caleb Guilliams here. I'm just interrupting this video quickly to invite you to check out our AND Asset vault. You may have been there. We're actually revamping it. And if you are somebody that wants to learn more about is life insurance the right fit for me? Does this asset make sense? Like does this actually help me be more efficient? We've put together a 10-minute documentary style video that I think does a really, really good job giving the history, why the AND Asset, different setups and designs that we use, and then we have an AND Asset vault that gives like case studies, calculators, handbooks and so much more. We are here to serve you whether it's a conversation, whether it's education or the video. So make sure to go check out andasset.com/vault to learn more.

A properly designed policy will show you some kind of cash value early on and will break even in year four, five, six, maybe seven. Okay? And so this policy breaks even in year six. I want to be very clear that I'm not going on record saying this is the greatest policy design. I'm just showing you, you know, how to read an IRR statement. So we put $50,000 into a policy. We have cash value at the end of the year at 39,432 bucks.

Okay? Meaning we have a negative IRR of 21%. IRR is just looking on the cash on cash, okay? It's not looking at any of the other benefits. So, it's not looking at the $1.3 million death benefit that you have. It's not looking at the ability that you can borrow against this 39,000 and still get the growth rate. It's not looking at the other living benefits. It's not looking at the future cash flow that you'll have more because this money is in your portfolio. It's just looking at the cash growth rate, which can be misleading from a standpoint of like we can't just look at this. This is not

Telling you the only, like, this is not sharing the only benefit of life insurance, but it's giving you the rate of return benefit. And so if you cashed out your policy in year 1, you would have a negative growth rate of 21%. Not ideal, not great. I'll be the first to say this is not a good deal. In year two, you've put in $100,000 total and you have $82,681. Meaning, if you cashed out in that year, you now have an annualized, you know, return of negative 12%.

Okay, you can see the death benefit is increasing. And the reason it's increasing is you're buying so much paid up additions that it essentially needs to increase the death benefit just to make this all tax-free. You can see in year five you have -36%. Meaning if you cancel, you've almost broke even but you're still in the red. In year six now you've crossed over. Now you have more money that you've put in. You have more money than what you've put in. So technically if you canceled this policy you'd have a $9,000 growth which is an equivalent of a .87%.

Now, now I want to show, now this .87% increases pretty quickly. And this is where a lot of people including advisers say, "Well, okay, this is where you're starting to get arbitrage." Or, you know, in year 10, you're starting to earn 2%. And you're like, "Okay, that's okay. That's decent, but that's hard to get excited about." Like in year 30, you're finally, year 30, you're earning 4.58%. Where they're wrong is the internal rate of return is taking into account all the down years. So on an annual percentage you're actually earning way greater than 4.58% because it's including the negative years, but this is showing every year, if it's showing every single year including the beginning year.

So, to break this down, I have a future value calculator. And so if you put $50,000 in, and again, 50,000 is just an example. I'm not saying that you could use this for 5,000. It's just an example that I have. So, you put $50,000 in every year, you know, over 30 years. If you earn 4.58% every single year, you would have 3.2 million. You know, this number. And you can see this is the exact number, meaning that life insurance gets you a 4.58% rate of return every single year including the negative year.

So here's the question I usually ask people. Life insurance, when you understand that it's not an investment, when you understand that it's an asset that you have access to that capital while it continues to grow. What other safe liquid assets do you have control over your capital, earn you anywhere near 4 and a half% in today's interest rates? Zero. So when we say life insurance is a terrible rate of return, we're comparing it to an investment, which we should never compare it to. If we compare it to a savings account or a safe asset, it's an amazing asset. It's an amazing rate of return.

Plus, at 30 years, not only is your cash value earning 4.5% tax-free, but you have $5.8 million permanent death benefit that's attached with that. Again, it's not an investment. This capital right here can be utilized and borrowed against to do other things with. That's amazing. That's why I believe if people understood the power of this asset, there would be a line outside the door.

Now, here's the other thing that I want to say is, if we compare this to a savings account, we have to compare taxes. We have to compare fees. We have to compare opportunity cost of potentially buying term insurance. And so if you just include a 30% income tax and a 1% fee, you take that 4.58% rate of return and now you need to earn over 7.6% every single year without a down year just to, quote unquote, keep up with the horrible, boring life insurance growth that life insurance gets you.

I'm telling you ladies and gentlemen that life insurance is incredible growth if you understand how to compare it to other assets in your portfolio. And so really the question that I've learned from Todd Langford is we need to ask a question, compared to what, into everything. This is a bad asset compared to what? And so when we ask this question into life insurance I believe it's an amazing asset when you compare it to other assets.

And so here's a little lesson that we'll end with because I think again it's really really important that we understand how to compare things. And so if your life insurance gets an internal rate of return of 3 and a half%. Okay? I've seen life insurance with 3%. I've seen life insurance close to 5% internal rate of return, but let's just say 3 and 1/2%. And we add a tax rate of 30%. Now some people will say, "Well, I don't have anywhere near 30% income tax rate." Okay, we can lower it. But I want you to consider what the future could hold. And I also want you to consider that we have a lot of clients in California and other places and they're like, 30% would be amazing. So I just use 30%.

If you just take that internal rate of return at 3.5% and we compared it to a savings account, number one, majority of savings accounts can't even hold a candle to this long term. But even if they could, now this savings account has to earn 5% just to keep up with the boring old 3 and a half%. Because life insurance grows tax-free and your savings account doesn't. I know we don't really notice it because we earn like nothing in our savings account, but if we did, we would understand that we would have to pay taxes, i.e. making us have to earn a greater rate of return in the savings account just to compete with the life insurance internal rate of return.

When you add a fee, 1% might be aggressive for some, 1% might be amazing for others. It's just a point that I'm trying to illustrate. If you had to add a fee on top of, you know, the opportunity cost of where you store your capital, now you need to earn 6%. And if we take a $5 million death benefit for this person that we did, they would have to pay $4,830 to get a permanent 30-year term insurance, making them needing to earn 6.9% in that alternative asset just to keep up with the boring old life insurance. This is where people will say, "Well, I, the S&P or my business or real estate earns more than

6.9%." I'm saying this, we're comparing this to a savings account because in life insurance you can borrow against a policy and invest in other things and now you get a dollar doing multiple things. I'm not saying that life insurance gets to 6.9%. That's not what I'm saying. I'm saying if we compare it to other assets and you compare taxes, you compare fees, you compare by term invested difference, and you also understand that this is not an investment, you can utilize that capital. Well, it continues to grow. You need to earn four, five, 6% or more in those safe assets just to hold the candle to the long-term efficiency of storing your capital in life insurance.

Why is life insurance as a contract have special tax advantages? Well, I mean, essentially what I was getting at is when we start looking at the numbers, when we start using our dollars, we're taking a loan against our policy, right? And the reason is, once you use debt as that vehicle, the IRS has deemed that debt is essentially not taxable. And that's really our strategy at the end of the day when we're using this concept. But there's going to be other times where you won't be using it as debt. And so will we be taxed on that? Should you get taxed on that? Like what are the strategies? Because there's a lot of them. We're going to go over the basic strategies, but there are other strategies as well when it gets to more advanced, especially business side of things, where you can get taxed as well.

Tom Wheelwright is often quoted for saying, like, think of the tax code as a treasure map and the government is essentially incentivizing you what to do, and they're going to give you deductions and credits and benefits if you follow and really help the government, almost like partner with the government. I know there's a lot of people that that didn't sit well. But the government wants to incentivize you to do certain things. That's why they give you deductions if you give to charity. That's why if you start real estate, that means the government doesn't have to get into the real estate business. And so they're going to give you benefits to do that.

The reason life insurance in general, before we look at the numbers, is such a good tax advantage is, if everyone had life insurance in America, we would not have problems, because every generation would have money and they would get more wealthy and more wealthy and people would be protected and the government wouldn't have to step in and bail certain people out. And so the government as a whole loves life insurance because they love the death benefit protection. And so it's important that we're going to look at some really incredible tax advantages, but they really stem from the fact that life insurance as a whole is something that the government loves. And no politician on either side of the aisle is going to say, "Yeah, I'm going to now tax the death benefit of this widow that just lost her husband or this family that just lost the breadwinner of their house." And so it's important to know that life insurance, yes, has some amazing tax advantages, but at the highest level is one of those products that the government loves because it actually, society and our country is better off for people having life insurance.

So with that, anything that you want to say before we jump in? Yeah, I would also say that people at a very high level, like that have a lot of money, that are essentially the unheard of, the unheards, the Rockefellers, the politicians, those types of people, they are huge fans of this as well because they have huge power. They're probably behind the scenes saying, "Hey, like this is something we want to keep," right? Because a lot of people ask, hey, like, can the death benefit that we're going to refer to, like can that ever be taxed, or like what does that look like? And when it comes to these people, they have a lot of power, including the government. A lot of people in the government are using this as a very powerful tool as well.

And if we look at history, any tax change that does happen in life insurance, people have been grandfathered in. I can't say that. Again, this is not tax advice. Don't take anything that we're saying in this video and say, "Oh, I'm going to actually do this for myself," and blame Dom or Caleb. But if you're going to blame one of us, it would be Dom. And so just take that with a grain of salt. But in history, if we can look back at history with any lessons, anything that's been changed, people have been grandfathered in as it relates to life insurance.

So with that, we're pulling up an illustration. This is just a basic overfunded policy putting $50,000 in. You're going to see cash values. You know, you have early cash value, it grows. You have a death benefit, it grows. Purpose of this video is not to talk about the illustration design. It's just to pick a random policy for the example. Cool.

Caleb, I'd love for you to talk about, one, like what is a MEC, and let's start with that, and I think that'll give us a good idea to carry over into how we can use this cash value and essentially maybe using that as a structural design too, and just that'll give us a good framework to start off with. Yeah. So a MEC is what's called a modified endowment contract. And essentially what the government says is, if you've put too much money in first year. So back in the day, people were doing like single premium life insurance policies where they would get a big chunk of money, put it in one time, and then there would be a little bit more death benefit up above their cash value. And so it would be very efficient. It would all grow tax-free and it was like a true loophole for the wealthy to just stick their money in.

And the government was like, "Hey, wait a second. You guys are really taking the advantage of insurance. You're not even getting that much more insurance because the corridor or difference between the insurance death benefit and the cash value is a joke." And so they were like, "Okay, to get the tax benefits of life insurance, which is, once your money is put in, it grows tax deferred, you can use it tax-free and it gets passed on income tax-free. To do that, you need to make sure that this is not considered a MEC. You need to make sure that this is actually insurance." Now, what's confusing is every insurance company has different guidelines and

...how they determine what a MEC is. And so, in a lot of cases, they want to make sure that there's some ratio of PUA, term writer, and base. And with that, we're not going to get into the major details there, but just know that the difference between a MEC policy and a non-MEC policy is how after using the cash value after you contribute on a MEC policy, there's certain taxes that you have to pay. And anytime above basis, anytime what you use cash above what you've put in, you would have to pay taxes whether you take a loan or you withdraw all that money. And then there could be some other penalties depending on how old you are.

Yeah. So, it's safe to say that the way that we design it is hitting it to the max limit to where it is maximizing the cash value, but it's not putting in too much to where it looks like an investment and the IRS says that's an investment, that's not an insurance. So, we want to design this to making sure that it is insurance and it looks like insurance. And so if you hit that MEC limit and you cross it, well, what ends up happening is you do have to pay a 10% penalty if it's before 59 and a half and you do have to pay taxes at income level as well.

So it kind of just works just the interest above the basis. Yeah, it just essentially works like a 401k or an IRA or anything like that at the end of the day. So we don't want to use it in that format. We don't want it to MEC. But there are instances where you could MEC policy and it does make sense. But for the purposes in today's video, we're going to focus on non-MECs, which then leads us into talking about like, well, how can we access our cash value? What are the tax advantages that come with that?

So, Caleb already shared that one, the policy grows tax deferred, and then we can access the dollars tax-free. So, when we pull up the illustration, which we're going to do now, we're going to share with you numbers and examples of what that looks like. So, if you look at the cumulative column, we're putting in $50,000 a year. Cash value one is 40,000 at year five, which is an important number to look at when we're looking at the break even point where we have more cash than we have cash that we actually put in the policy. That is our break even point. The reason why that's important is because we are now starting to look at when we have more money. And that is where Caleb was talking about where you have to pay taxes on the growth of your policy if you're going to essentially withdraw.

So, there's two strategies that you can do when it comes to life insurance to use your funds. You can take a loan against it or you can actually withdraw. And so when you take a loan against your policy, what you're doing is you're leaving the cash value intact. You're having your dollar grow for the rest of your life and you're now able to have your dollars do multiple jobs. Your money will compound, stay with the insurance company and grow, giving you a specific interest rate. You can take that same dollar because it's used as collateral to then go invest and use for a different purpose.

That is how we use and we teach people in regards to the AND Asset is to borrow against, to use a loan. There is a controlled cost with that. So to be completely frank, you are going to have to borrow. It is actually borrowing. Think of it as a line of credit to actually get that tax advantage. And that is how loans and lines of credits work is because the IRS says, "Okay, that is a debt. We're not going to make you pay taxes on debt."

Now, the second strategy is a withdrawal. And that is where Caleb was saying when you if you withdraw your funds, you can withdraw up to the basis. And so when I say basis, basis is essentially saying the money that you have contributed. So if we look at an example, let's just go to year 15. Year 15 you have put in $750,000 of your own dollars. Then it has grown to $1,055,846. You can withdraw, actually take out of the policy $750,000 without having to pay any taxes. The other remaining, which is essentially around $300,000, if you wanted to continue to use that money on a withdrawal basis, that is now when you would have to pay taxes at your income level.

And so what we'd want to do is continue to take loans against this policy until it made sense to use a strategy where we start to take withdrawals and then borrow against the growth on the policy. And so realistically we would take loans on the policy really until probably like retirement, until you're older. And that's when it would make a lot of sense because what I've actually learned from Caleb and Caleb may have learned from a lot of experts is the concept around why would you want to kill the goose that's laying the golden egg, right? The golden egg is essentially the principle that is growing. And once you start pulling money out of the principle and you start deploying it other places, you're now killing the compounding interest.

And so we want to leave that goose that is laying the golden egg, which the golden egg is that interest, right? We want to leave that intact to continue to compound and grow, which is why we want to be able to take loans early on. And then later on when we're older and it doesn't matter as much, we can start deploying that capital from a withdrawal basis to then maximize our actual conversions of the dollars, how much dollars we can actually use, and then take the difference which would be the growth on loans basis so we never have to pay taxes with it comes to this strategy.

Well said. I was ready to jump on you if you made a mistake and I think you said it perfectly, man. I think overall maybe rewatch this because there was a lot that Dom said. But overall, the other reason why you wouldn't necessarily want to withdraw because some people are like, why would I borrow to use my own money? And again, we have other videos. You're not borrowing to use your own money. You're actually, there's benefits of your dollar staying in the policy and you borrowing against. But if you did withdraw, it's actually a mini surrender. And so, not only are you not able to ever put that money back into the policy, but there is...

...death benefit that gets permanently surrendered as well when you take that money out. And so, there's not an interest charge, which may be when you're older and you want to look at the most efficient way to take your money out. Maybe a withdrawal is better for your situation, but in a lot of cases, a loan creates flexibility on repayments, but also makes it super super clean and continues to create your AND Asset to compound every single year. And so, anything else that you want to mention?

Yeah, when Caleb was talking about the withdrawing, a thing to consider as well within your first like 15 years is the safe side. If you actually withdraw within the first 15 years, the death benefit will go down like Caleb said, which can actually cause the policy to MEC. So, which is why another reason why in the early stages we want this policy to keep growing and then using the loan function along that way.

So, in summary, life insurance, when set up and used properly, you don't get deductions by getting your money put in. In other words, like with certain 401ks and IRAs, you get a tax deduction which you get to write off your taxes this year. You don't get that with life insurance in most cases. But after tax contributions into life insurance, when set up and used properly, your money will grow without having to pay taxes. You can utilize your money on a tax-free basis. You get to pass it on income tax-free to the next generation. Now, with that, hopefully you can break down some of the estate taxes that people need to know and then also if it's not set up and used properly, how other taxes kick in.

Yeah. And so, like Caleb was talking about from a deduction standpoint, but let's just talk two quick ways on how it could be deductible. One, the interest that you're borrowing against can be used as a tax deduction, right? Obviously, talk to your CPA. That's a conversation you should have. But if you use it for a business purpose or investment purpose and it's documented appropriately and using even like third-party lenders can really help with the documentation piece of it, you can write that off from a standpoint of just the interest, right? Because that's how loans work. You can write off the loan interest.

Another times, if you're a business owner and you want to have executive bonus plans or you want to contribute to your employees to essentially have a benefit, you can write off that interest as well because you're the one paying the premiums and then they're the ones benefiting from it. Typically, if you are the one where you're benefiting from it, the death benefit is in your name, it's not going to be tax-deductible. But if somebody else is going to benefit from it and your name is on it, that's a way that you could get tax deductions from that standpoint.

And it is also important to know that your employee or the person that you're getting the deduction for, they don't get all the tax-free benefits that a normal person would get with life insurance. So, there usually is a trade-off. And like what you said early on with borrowing against your policy, if you were to have a regular policy and you borrowed against it to buy a car, like okay, yeah, you get to borrow that money and you don't have to pay income tax on that, but like the interest you don't get to deduct. That would be amazing. But if you use your policy for business purposes, like Dom said, if it's documented properly, you can actually write off the interest, which is incredible.

There is a big debate out here and many people say if you're going to use your policy for business purposes and you want to be like ironclad, make sure that you don't get in trouble with the IRS. Use a third-party lender and don't borrow directly from the insurance company. Again, talk to your CPA. There's debates on both sides of the aisle, but many people would agree that the third party lender is the cleaner way to do it if you're going to deduct the interest for business purposes.

Yeah, we're going to create a whole another video around that as well. We already have one, but we'll create another one around it. But something we haven't discussed either in this video is talking about the death benefit and how that is taxed, right? And so the death benefit, how is that taxed, Caleb?

It's income tax-free, meaning you never have to pay income taxes on that. But what I'm not saying is it's estate tax-free. And in many states and federally, you know, there's an estate tax. And if your estate, meaning when you pass away, if you're leaving more, then you know, it could be 11 million, it could be 20 million depending on when you die, what year this is when you watch this video. So again, make sure you're up on the current estate tax rules. But it doesn't matter whether it's life insurance or you're leaving a house or you're leaving stocks, like that would all count towards your estate.

And so you want to make sure that if life insurance and other assets get you over where it would trigger the estate tax, you want to make sure that you're working with someone that can utilize special trust. And again, not tax advice, but an irrevocable trust. Some people call this ILITs. You lose a little bit of control, sometimes a lot of bit of control during your policy. But if your policy is controlled and owned by that trust, and that's in some cases a way to lower your estate taxes, giving you the ability to leave more to your family without paying the government.

Yeah, Caleb said it's not tax advice, but it's also not legal advice either. One or the other. Remember, it's Dom. If you have a problem, you know, it's Dom's giving this, not me for sure. So to summarize, the death benefit when you die and pass away and it's going to your beneficiary, that will get passed down to them tax-free as well. Now if you're a C corp as well, there's a good chance that you also will get taxed at a certain level in regards to that death benefit as well. So it's really going to just depend on who you are, how it's positioned, how much estate you have, like there's a lot of different factors in regards to it.

There's another thing is when we start looking at like selling your policy, right? If you sell your policy, you're now essentially using it as an investment. So you now have to pay taxes on the growth on that. There's a lot of different characteristics. There's another one actually where if you are a business

owner and you have a key employee and you're putting insurance on that key employee and then you transfer that key employee policy from one employee to the next employee because they left. There's a rider that allows you to do that. And if you do do that, you essentially are quote unquote surrendering the policy and putting it on the next employee. And by doing so, you have to also pay taxes on that to transfer it over to the next employee. So there's lots of taxes and strategies and things that you have to be aware of when you're starting to do some of this advanced planning stuff, which is why you obviously want to work with professionals in the space.

We're going to go down a rabbit hole. Okay, we're going to go down a rabbit hole. You opened up a can of worms. So here's what's really cool is what you could do is I could buy a life insurance policy on my dad, meaning I'm the owner. He's the insured. I contribute with the policy. I can utilize the cash value, borrow against. It's all good. And then when my dad dies, that death benefit would get paid to me income tax free. That's where you can own and control another policy and the death benefit gets passed on income tax free. Now it's because we have insurable interest and when we designed the policy, I was the owner. He was the insured. So you're totally good there.

But there are tons of markets out there of people that have permanent life insurance. Many of these people have universal life policies that are massive at the time and they're at a place in their life where you're like, I don't want to continue to pay this. So like I have this death benefit. It could be a million. It could be 5 million. It could be 10 million. There's, let's say, there's a million dollars of cash value. I could cash it out and get a million bucks, but I'm like 75 years old or 80 years old and maybe like maybe that wouldn't be the best.

And there's a whole market out there where you could sell your death benefit, which is a paper asset that will happen, that's not correlated to the market. There's so many investors out there that say, "I would love to pay your premium for you, and then when you pass away, I get the death benefit." There's a ton of people that invest in what's called life settlements. Again, insurance companies don't necessarily like people like us talking about this. So we're not telling you to do this. We're just saying like there's a market which tells you there's more value than just the cash value in life insurance.

But if you were to be an investor and buy those death benefits as an investment, you forfeit the tax-free nature of that and no longer the death benefit no longer becomes tax free to you because of that. So that's two examples of how you can benefit from other people's death benefit. One, you have an insurable interest. One, you don't. That's the difference.

I'm over here kind of chuckling because one, it's not tax advice. Two, it's not legal advice. And three, it's not financial advice either. It's not investment advice. So you know, not financial advice. Yeah, we just are in hot water, just floating down the hot river.

More and more, you know, as we're interacting with individuals, Alden, I'm realizing that people and especially our clients and people that watch this channel, a lot of times they might look at life insurance as an amazing strategy for like one of the benefits. And like I feel like people are undervaluing, under selling and underappreciating a properly designed life insurance product and what it can do for their entire financial portfolio, their life, how they show up. And so this way of making content is another way, just a way of being creative, but also just helping people think outside the box because we talk about life insurance as an and.

And when you go through the list, you might like how Alden words things better than mine. And the reality is all the things that we're talking about, if you have your life insurance product that's set up and used properly, it's an and. It's not that you get to pick five out of these or pick one or the other. It's an and. And so, anything that you want to say before we jump into this?

And I think it's going to be a great episode because one of the things I like to say is that planning does not happen in a vacuum. And what I mean by that is who you are, what you need, and your values coming into the call kind of direct how we present what we present. One of the things you're going to see between Kale and I, I'm assuming, is that our lists are not going to match because we're different people. We have different value sets when it comes to this type of product. But our job in a conversation with any possible clients and our existing clients is to identify their values and then how can we translate their values into what we position for them in insurance.

I love it. The example that I use a lot of times is the smartphone versus the flip phone. You have a phone but one gives you more jobs than the other. I'm not even saying that an iPhone is better for you long term because I think there's a lot of problems with like iPhone and, you know, is it a distraction and blah blah blah. But the reality is no one would argue the fact the iPhone does more things and can do more things and has a greater utility and potential output than a flip phone. And I really believe people understood the power of life insurance. It's not just that one benefit. It does multiple things for you.

And so let's dive in. We're going to be doing the countdown. And what's going to be fun is we're going to start from 11 and then go to 10, 9, 8, 7. So what we'll do is I'll give you my number 11, then you can comment if you want, but then you can give your number 11 and then we can, if there's points that you make that I want to, you know, double down on, I can say something. You feel free to interrupt me anytime, Alden. And I hope that this is very eye opening and life-giving for the person watching.

Perfect. Let's do it. Number 11 for me is competitive growth. Okay, that might be shocking to the person listening to this. So much of our content is on the internal rate of return and when life insurance is set up and used properly, it gets an amazing

...growth rate. But there's a lot of other benefits that I value more. And if it was just a rate of return game, I would not go for life insurance. That doesn't do it for me. It's the fact that there's so many other things that we get. And so that's why competitive growth is on the list, but is actually at number 11.

Well, it's definitely made my list as well, but it's a little bit higher for a couple reasons. I work with a good amount of higher net worth clients that are really looking to store capital in a machine, right? And they may not be leveraging it to the same extent. And so that competitive growth for most of the clients I work with is actually fairly important because we're looking multigenerationally on that.

So my 11th benefit is completely different. It's actually that there is no maximum contribution limit to life insurance. So slight caveat, the single life maximum US market runs about $300 to $400 million. So in theory, if you're putting in so much premium that you're buying that much death benefit, yeah, there's a maximum. But for most people, the vast majority of people playing under that threshold, if you have a very low cost of living, but you have a very high income, we can figure out a way to get a lot of that money for you into life insurance.

It's not like a qualified plan or, you know, self-directed Roth or even a SEP has some aspect of limitations on self-employed pension. SEP IRA or a SEP Roth still has those types of limitations on how much you can get into it. If we're truly going to use this as a lifetime asset, the AND Asset, and give a lot of the tax benefits we're going to talk about today, having no limits on what you can actually do with it, I think, is important, but it's still at the bottom of the list.

Love it. I love it. All right. So number 10 for me is the critical and accelerated benefit. So essentially it's the ability to use your death benefit while you're still alive. And it's something I feel like you can't do certain activities of daily living if you get a terminal diagnosis. All the policies that we set up for people have these riders built into it that essentially gives you the ability to use that death benefit while you're still alive and gives you that option to be able to do that.

A lot of my list is just options of how you use your life insurance. And while this is an amazing benefit, this is number 10 for me because again, if I had to eliminate a lot of benefits, this would be on the chopping block. Although it's super valuable, it's one of those things where it's normally not the decision-making factor for me and I think a lot of our clients wouldn't necessarily be a make or break benefit, although everyone will take it if it's included in the plan.

I was definitely ready to push back, actually ask you why it's so low on your list, but you just told me so. Darn it. I don't get to be argumentative here. This is much higher on my list. I told all of them before the show, let's argue, crowd arguing, like make a claim and let me attack. No, no, it's all good.

I mean the accelerated benefits again much higher on my list. I have a background in healthcare both prehospital and in the hospital. My mom's a palliative care physician. I've seen a lot of stuff about why this type of thing is important on the life insurance side, to accelerated benefits and everything in between. So much higher on my list.

For me, number 10 came in as just a very practical standpoint. For a lot of middle-income Americans, doing this type of life insurance planning develops a structured savings plan. It kind of creates a planned contribution habit that you can maintain and increase for the rest of your life. We can say until we're blue in the face like if we put money away, it's going to grow and we're going to have a great retirement. But if you don't actually do that, it's like Dave Ramsey's buy term and invest the difference.

Well, in a vacuum, that only could work if you're actually investing the difference, which most people don't. And then again, it still doesn't work. And we can prove that with math, but to get off that horse for a moment, structured savings plan for most people, I think, is actually a very important benefit of having this type of policy.

I love that. I love that. All right. So, number nine for me is creditor protections. Life insurance in certain states like Florida and Texas gives you a ton of creditor protections and in some states unlimited creditor protections, which is amazing, but then there's other states like the state of California, state of Washington, that doesn't give you much at all and it's kind of laughable.

So, creditor protection, I have in brackets just in my notes, like the privacy aspect of it. And then also when it comes to the privacy, creditor protections, I also would include things like a 529 plan alternative. If you have your money in life insurance policy, you don't necessarily have to report that on a FAFSA. And there's an aspect of life insurance being private that is great. So, I put this as creditor protections, but you could also use the word privacy as well, and it's important. That's why it's on the list, but it's number nine for me.

That's hilarious. I feel like the things that you're listing at the bottom are like at the top half of what I'm listing. So, it'll be fun to get to that point. Love creditor protection. Yes, if you Washington, California, Rhode Island, and a handful of other places, I'd consider moving for other reasons, but the fact that they don't give you much protection in the life insurance space is a big deal.

Little fun fact that some people may not be aware of. If you think back to the early 2000s, the big Enron scandal, if you do any research on that, some of the individuals that were implicated and ultimately went to prison had annuities and life insurance products that they still have access to in prison that house a decent amount of their net worth because of state protections. So, not saying you should go do something like that, but you know, at the end of the day, we don't have any control of what other people do in the litigation space. And that protection

...is I think very very important for someone like them. That's the by far the greatest benefit. So that's what's beautiful about these benefits that we're going back and forth, is everyone looks at things a little different, and that's what I just love the conversation because that's great. I'm seeing yours for the first time and we'll definitely argue over yours in a second. So say what your number nine is.

For me number nine is optionality, right? So we start a plan today. Your desire for what that plan is going to do for you may change over time. But the nice thing is the way it's structured, if it's structured properly, you have an option for retirement supplementation, pension maximization. You could use it as an opportunity fund. You could have charitable intents for the death benefit, and all those things don't have to be planned into day one. It's just the fact that you have it. You have options of what you want to do with it and how you do it. So, huge benefit to me.

And I feel like we didn't caveat this well enough, but these are the 11 benefits of life insurance out of like 60 that I can think of. I have a much longer list, but these are the top ones that we came to the table.

Well, I feel like you're cheating because I gave like actual benefits and you're like bundling up and you're like, "Hey, these like 10 things fit into optionality." Or it's one word. I love the word optionality so much. I think that would be far greater on my list because the idea, I think you use optionality as a way to talk about like retirement supplement. That's a word that I have in one of my list. But optionality, like I almost think of like that's the definition of the AND Asset. Gives you ultimate options to use cash value and access it to make a move, or you have protection aspect you have.

So I think of optionality as something like super valuable because it very much gives you options while you're accumulating, while you're in distribution and in legacy. Like if you have a life insurance policy, you have more options than less options. So that's like, I love that word. That word doesn't even make my list because that's the beautiful thing about how we took this exercise, is we did it a little different. But I love the word optionality, and if that would be like near the top of my list in the way that I explained it.

Next one for me is tax-free use. The idea of you being able to utilize money throughout your life in a tax-free manner. And I say quotations because it needs to be set up and used properly. Obviously, life insurance could be set up poorly or not used properly and it's not like it's becoming tax-free, but if it's done properly, you should be able to use money throughout your life in a tax-free way. And that's super valuable, like super valuable. I want to just not underplay it just because it's at number eight. But I sometimes think, Alden, we pitch that too much. And I think accessibility to capital is way more valuable to me than the fact that it's tax-free.

My number eight, I have leverable, which I'm not actually sure if that's the correct way to say that, but it can be leveraged, right? But this isn't just at the insurance company. One of the things you can do obviously with your policy and your cash values is you can borrow against the cash value when you're borrowing directly from the insurance carrier. Now, in some circumstances, it may make much more sense financially to actually borrow from a third-party lender and collateralize your policy. So we've worked with clients that have done this strategy. Perhaps this is collateral for an SBA loan, Small Business Association loan as well. And so your cash value in the policy itself can serve as leverage for many different points throughout your life.

And a brief example, if you have a completely paid up policy, let's say it was a one premium, got a million dollar death benefit, the insurance company knows you're going to die, right? That is definite because it's already paid for. You can take that to a bank and say, "Hey, how much you want to bet on me dying in this time frame?" And get a loan based off of that that may be more or less in your cash value based on your health. So like those types of lending situations as well. So when I say leverage, it's a fairly broad term, but I like it because you have so many options depending upon your circumstance to leverage the asset that you have on the table.

Love it. I love it. You're going to see that leverage is a word that actually comes up for me very low on the list in a good way. I have a different way of explaining leverage, and that's why this video is so valuable, is we're literally using the same words and we have different perspectives on it, which I love. So, love that.

All right. So, for me, number seven is tax deferred growth. When set up and used properly, your money will grow without having to pay taxes ongoing, which allows the compounding aspect of your life insurance policy to build momentum. Super valuable, but at the end of the day, again, you'll see why it's number seven and not number one on the list here shortly.

Yeah, absolutely. And one of the things I love about life insurance in this space with a cash value is this tax deferred growth. When modeled out over time, it's already net of fees and there's no taxes to be taken out. So the numbers that you see on the page are accurate. One of the things that originally pissed me off and got me into the insurance space is working with financial advisers who would show you that mythical one day someday hockey stick graph of where you're going to be in a bazillion years, but it didn't have any fees calculated into it. It had taxes not calculated into it. And so it's a much more true number in my opinion. So glad that it made the list.

Now seven on mine, which is one actually you already covered, is competitive growth. Your number 11. It's my number seven. I mentioned I think when it was talked about yours that the tax equivalent internal rate of return can actually be pretty high depending upon your tax bracket. So for some people this is a great place to just store capital either long-term or short-term, getting additional returns and competitive growth in a tax-free environment to be very very

...beneficial. I love it. If I were to bundle in growth and the taxes and the access, it would be far lower on my list in a positive way. When I think of benefits, I think of like actual individual uses, you know, and you're more bundling up, which I actually like your list better from an educational standpoint because I think it's better from education and I'm more of like out of all the things that life insurance could do, what are the top 11 that I would take? And so love that.

Number six for me is the retirement supplement benefit of life insurance. I don't like the word retirement, but I think if you understand what life insurance can do for someone in the future, it's almost overwhelming how many options, this is where optionality could come in, that unlock for you. But the more important thing is life insurance is an amazing protection vehicle. It's an amazing place so that you can access your money. But if we just look at access to money and protection, you might not value like having it in your retirement years, or you might be like, well, I'm not at that stage, or like I don't need that. But if like you understand how life insurance could actually be a super bond and how it can actually make your other assets better, it really for me brings everything home. And so I have committed to doing a lot more content on helping people understand this, because if they get that, I think they would be a lot more excited about having it as a part of their portfolio.

Absolutely. I can completely agree that sentiment around retirement. I think that word definition means taken out of commission, and I don't want that to ever happen to me. So I think we agree on that. I like what you mentioned about just having options, right? I guess this is the section where I called it optionality, right? Retirement supplementation, some of the other benefits you can get there. So it's a good spot on your list. I'm glad it's still in the top 11. Otherwise, we would have been pretty angry at you, to be honest.

Diving into number six for me, flexibility. And I think flexibility in my term, I'm really talking about the policy structure itself from a premium and even the death benefit perspective. Because whole life insurance, when it's set up and used properly, designed properly, it can be adjusted. Meaning your contributions can go down, they can go up, you can skip some, you can defer those same contributions, you can decrease death benefit and never pay a grin, you could buy more death benefit. Like there's so much flexibility depending upon your situation year to year.

I said it before and I'll say it again. Planning doesn't happen in a vacuum, and the vacuum that we may look at in one microsecond tells us one thing, but six years from now you're in a completely different situation. So if you need the flexibility built into your contract, it's absolutely there for you to use it. And I think that's incredible.

Love that benefit. It didn't even make the list for me mainly because of like flexibility is not something that like shows up in a contract that says this is flexible, but it's just like it's the nature of the strategy aspect, which I love, and I could not agree more is we don't know what's going to happen in the future, and giving yourself the options, again, everything goes back to options for me, makes it that much better. Love, love that.

All right, number five for me is the ability to save more. And I just believe many of our clients, myself personally, am able to save a lot more money because I have access and control of my money and I understand life insurance and all these benefits. And so because I understand all the benefits that I get with life insurance and just not now and in the future, I'm able to save more money confidently than in a scenario that I may put money aside for 59 and a half or something or quote unquote retirement. I would still want to invest and save, but it would almost be like I'm giving up some control. And so like you'll see for me the list is I value accessibility and using my money. And so the fact that I can save more in the process, I think is a huge benefit, not just for me, but for many households.

And that's one thing that Nelson Nash talked a lot about in his book, about the difference between volume of savings versus rate. And the reality is, we're obsessed with rates of return. But if we could just help people save more money in the long run, they're going to be a lot better off.

Absolutely. I think this kind of aligns with the structured saving plan concept I added for number 10. But from just saving more, you're absolutely right. And to be fair to Nelson Nash, I think what he was talking about from a volume perspective was the volume of interest that we pay versus our rate of return, right, in that context. But from a savings perspective, I think it works the exact same way, right?

Number five, accessibility. So accessibility kind of tied into the leverage side of things for me, but your ability to get to your money, whether you withdraw it, lend against it, collateralize it for something else, and to do so without penalty or taxation if you're doing it properly. I think that's a pretty powerful way to utilize this life insurance strategy.

Yeah, I agree. It's lower on the list for me, and that just tells you how much I value accessibility. And I would ask you this, if you could not access it or if it was not liquid, how many people do you think currently work with us would change their policy designs if they knew they couldn't touch it till a certain age?

Yeah. I mean, if we changed our marketing and talk to a different audience, I think we'd do fine. But I think for our current audience, accessibility is absolutely imperative.

Absolutely. Accessibility, I think, is really important, but at the same time, you're buying an insurance product. And I think there's a lot of value in the fact that you're buying an insurance product. So huge benefit of accessibility for sure, but it's not higher on my list toward the top is. And it's not higher on my list because I think the insurance aspect of things is still more important in my mind. But it's funny, Caleb, your list was, it sounds like the way you're speaking, you start at 11 and you're working down. I start at 11 and I'm working

...up. So you keep saying, "Oh, it's better farther down on my list in a good way." I'm like, "What does he mean?" And it just clicked. I just figured out what you were saying. Yeah, down as in lower numbers meaning good. But yes, if it's funny, our notes, I did 11 to one and Alden did one to 11. So we're like ships passing in the night kind of deal. Love it.

All right. So where are we at? We're at number four. Were you shocked when you saw this from number four for me? I put safety/guarantees because I expected it to be top five for you. I was thinking about, this is like the way that I see life insurance. I think of it very much as a foundational place to store, protect, and use my money. And so it's only going to be foundational if you have a belief of safety and guarantees. Like if someone came to me and said, "Hey, Caleb, we give you all the benefits of insurance and there's an 80% chance that this thing is going to work and a 20% chance it's not." I'm out. I'm out.

It's the example that so many people use about airplanes. Would you get on an airplane if there's a 95% chance that it's going to land? Probably not. The answer is no. And so for me, I'm totally cool taking risk. Like I lose money all the time in business opportunities and all these things. That's why my opportunity cost of investing is high, because it's like if I'm going to tie up money, it better get me more than 8%. But if I have a foundational place to put my money, I want it safe and I do not want there to be what ifs. Hence why I'm a big, big fan of whole life for when we're talking about it in this lens and not necessarily speculating with other insurance products that might not be as safe. It's number four for me.

I think it's good. It makes a top list on mine over here as well, as you'll see in a moment. The safety is absolutely huge. So I'll touch on that in a couple minutes. But I think I agree with everything you said. On my side of the table, and I seem to be grouping multiple items into one, as you highlighted before, but for me it's tax favored treatment of life insurance, because it's not just that it grows tax deferred. It's not just that it gets tax exempt distributions and tax exempt lending against the policy leverage, right? But you also have that income tax free death benefit. So there's four different places where you're getting a tax benefit for using policies.

And if you're leveraging against the policy for the purpose of business investments, go talk to your CPA. You can deduct the interest that you're paying back to the insurance company. So that's five tax favorabilities of using an insurance policy in this way. I think that is phenomenal, and especially for individuals who have an estate tax problem. If we take life insurance, focus it to build a death benefit protection for the cheapest cost possible, warehouse that in some irrevocable trust planning outside of your estate, all of a sudden at your passing, now your family has the liquidity to pay the US government all the taxes that they're due.

And oh, by the way, you have to do that within nine months. So if you don't have the liquidity, it becomes a big problem. And we've seen unfortunately clients and other people fire sale assets at 60 cents on the dollar to pay the tax man in nine months. I think tax favorability all the way around from beginning to end is really, really important.

Yep. Love that. Love that. And my number one benefit that I'm going to talk about ties some of that in. So we'll see how that overlaps. But I love the tax favored treatment and I love how you articulated that. Number three for me is the death benefit. The death benefit is one of those things that it's like obvious. It's life insurance. It comes with a death benefit. And for the first couple years of being in this space, all then I could care less about it. I wouldn't even mention it in the top 11, which I'm embarrassed to talk about, just to think of why I had such a small belief in it, because I was so caught up in like this thing, it's not the insurance, it's just an insurance wrapper.

And then the more I've just experienced, had conversations, seeing one of my best friends pass away, I've just realized having a protection wrapper, umbrella, having a death benefit at the center of a plan to cover your human life value is incredible. And the fact that we get all the benefits that we do and an amplified and a leveraged death benefit on top of it is pretty remarkable.

Absolutely. And I'll share a little bit more about this as well in a couple moments, is actually higher on my list as well. But something that I think is often overlooked with people who do what we do are really focusing on the high cash value space. A mentor one time told me this, but for young people in our space who are young in the industry, they're okay with you not focusing on the death benefit. They're okay with really focusing on that cash value growth to the exclusion of protecting your family. The longer you're in the industry, the more death claims that you deliver as an agent, you start to very quickly realize that there's a reason insurance exists. And the death benefit is not just a bonus. It is the reason, in my opinion, why insurance exists. So life insurance particularly. I absolutely agree. Top three for sure.

All right. Number three on my side, privacy. Privacy takes a couple of different forms in this context. One, the obvious one is that it's not a public contract. It's a private contract between you and the insurance company. It's a unilateral contract in that the insurance company has to do what they say they're going to do as long as you pay your minimum premiums. And so within that context, you don't have to share the fact that you have life insurance with anybody.

Now, there are certain circumstances where it may be required to be disclosed if you're applying for Medicare, for example, or Medicaid. But in the context of your general day to day, you go to the loan and apply for a bank loan, you don't have to list this as an asset. If you go to the FAFSA, like you mentioned before, you don't have to list your life insurance cash value as an

...asset because in into the industry, cash value is a byproduct of life insurance. It's not the focus. So most places don't consider it an asset class. The number of times I have had to explain it to a mortgage broker what cash value is in life insurance is shockingly annoying, because using it for collateral for the loan or ultimately using it as a down payment, right?

It's private, and I think that's a huge benefit, because if you're storing hundreds of thousands of dollars into a life insurance policy over the course of your life, nobody else needs to know where you're putting your money. This is the reason personal finance is personal, is because it's personal. You shouldn't have to disclose everything that you're doing with your finances. I love, love, love the privacy aspect of it.

Before we go into the top two, which will be very exciting, I just want to say if you are watching this video and you want to learn more from Alden or someone on our amazing team about maybe your financial situation, you might have an insurance policy that you want us to take a look at, or you might want to just learn more to see like, does this make sense for my financial life, there'll be a link down below. We also have a link if you want to learn more. We have a life insurance vault, a ton of resources. And so just wanted to make a call to action, because we are trying to grow the BetterWealth family, and the more people that we can talk to and serve, the better.

So with that, number two benefit, which is like we're now getting real serious here, is accessibility for me. Accessibility, because if I didn't have access to my funds, then all these other benefits, it's just valuable to me having access to funds. Because even like the death benefit, why is the death benefit number three and accessibility number two? Death benefit is really important, I would go a different route, I would go maybe like a guaranteed universal life where it's like, I guarantee get my death benefit for my family. But the fact of the matter is, because I have that accessibility, I will change my behavior and be able to fund a lot of money into life insurance and get all the benefits long term, which I'm stoked about, but I'm only going to do that if I have access to my money throughout my life.

That gives me the permission slip to say, "Yeah, I'm going to fund and I'm going to put a lot of money into life insurance." So hopefully you kind of see the logic of like, I love all the benefits that I've mentioned to date. All those are made possible because I have access, and so I'm giving it maturity and time to benefit all those.

Yeah. Well, so I love that you said it the way that you did, because it makes me want to put accessibility higher on my list, because you're exactly right. The accessible nature of it makes all the other, some of the other benefits I listed, possible. So completely agree with that. And something that a mentor of mine told me is that there's an immediate vesting period when it comes to life insurance. You can access it within 15 to 30 days if it's built properly for cash value. So compare that to like any other savings vehicle outside of a savings account, like qualified plan, those types of things, it's hugely beneficial to have access. So I completely agree with that. It's awesome.

Number two for me is safety. This goes back to one of the terms that you use all the time, Caleb, is that life insurance, when it's set up and used properly and it's the right product for the right person, provides a huge degree of safety. Again, just like a lot of my list here involves multiple things. I think a big one is lack of volatility, right? So if we're using a whole life insurance contract with a mutual carrier with a nearly two century track record, yeah, there's going to be volatility in the dividend, but the assumption is they're going to continue to pay dividends like they have for the last 177 years, #PennMutual, right?

So there's a lot of safety in the fact that the life insurance cash value is going to go up every single year without fail, because it's guaranteed. The only question is how fast, right? And if the contract is structured properly, you also get these other aspects of a guaranteed increasing death benefit every year. You'll also get, and that's carrier to carrier, guaranteed cash value increase every year. And the safety protection, the safety side of things, I think is very closely lined to this concept of protection you talked about earlier with creditor protection, right? You can put it in there, it's warehoused, it's protected under state law in most states. And I think that's a huge value for a lot of our clients.

I think that's well said. I look forward to hearing people's thoughts in the comments on how you would make the list, like how would you make the order, and what benefits maybe that Alden and I talked about that wasn't even on your radar. So we're looking forward to hearing from you. My number one, you ready for this?

Next week to see Caleb's number one. Yeah. Yeah. Tune in. Yeah. Commercial break. My number one benefit is leverageability. Now let me explain, okay? I'm not just meaning the leveraging infinite banking style, like getting a loan rate at five or 6% from the insurance carrier. That's not what I'm talking about. The way that I define leverage is an amplifier, and I ultimately believe that leverage is a stacking mechanism.

So the fact that I get competitive growth, the fact that I get accelerated death benefit, the fact that I get creditor protections, the fact that I get tax treatment, the fact that I get optionality in retirement, the fact that I get to save more and it's safe and I get a death benefit, and oh by the way, I have access, is how I'm bundling it up into the word leverageability. I actually think a better word for this would be optionality. That's why it's hilarious that that's number nine on your list, because I actually like leverage and optionality is very similar to me. And so the idea that I can do one thing, but I also get all the other benefits, is the reason why accessibility is number two. So, and guys, by the way, this is our YouTube channel. We can make up the rules. So if you're like, "Caleb, you're totally cheating and blah blah," I don't really care. You know, this is

Our YouTube channel. We're making this. So, but that's that's why it's number one. And that's why I put competitive growth as number 11, is because I knew it was all going to get tied together. But yeah, that's how I would answer the most important benefit for me when it comes to overfunded or max funded whole life insurance.

That's great. And Caleb, I'm going to put your feet to the fire for a second here. One of the first times you and I had a conversation was in Garden of the Gods many years ago, and I asked you one of the questions I like to ask people is, "How could I bring value to you?" One of the things you said at that time was, encourage me to continue to produce content. Right. Okay. Okay, we're doing that. Amazing.

But you also said, "I want to write another book." And the name of that book at the time was Value Leveraging. Speak to the fire here, bro. Like, that would be an awesome book to write, because you talk about leverage so eloquently. And I think a lot of our clients would love to see that published.

I appreciate the call out, and yes, when I get my act figured out on how to crank out books, it's on the short list, and it's something that I feel very strongly about, and you're totally right. So, thank you. Value Leverage is a book that will be written in the future, and so thank you for the call out. Value Leverage 2026. There we go.

All right. My number one in this conversation is the word protection. For me, life insurance is the number one benefit of life insurance. The fact that we have the ability to protect human life value, mom and pops, single moms, like everything across the board, and protect their interest, their family, their kids. I think the fact that death benefit exists is extremely important. So number one for me is protection. Death benefit, the income tax-free death benefit, providing liquidity.

I had a client many years ago, actually one of my first clients, said like, "Alden, I don't want to make anybody rich when I die." In that conversation, I had no words to articulate the importance of death benefit because I hadn't been around long enough to be able to do that. Ultimately, they ended up, that was actually a best friend of mine, and she passed away. And so it's like, death benefit became infinitely more important after that conversation where I failed as an agent of providing value to somebody because I was afraid of damaging the relationship. I didn't want to push too hard. So, if any of my clients know this, if you talk to me, I'm going to push you a little bit on protecting your family.

And it's a number that you have to decide on. But at the end of the day, death benefit protection, it's only a benefit in the fact that now your family has time to breathe after something happens. It's only a benefit that it provides liquidity. It's only a benefit that it gives your grieving spouse, grieving family members, grieving kids, options, and maybe your spouse doesn't have to go out and find a sugar daddy, right? So that to me is huge.

Then additionally, I wrapped in living benefits, right? So accelerated death benefit rider, chronic, terminal illness, those types of things are all in here as well, because it protects something. One of the things that you probably noticed with my content is I talk about long-term care insurance. I talk about disability income insurance because I believe in it. I think it's important. At the end of the day, insurance is insurance. Everything else is a bonus in my mind. Protection for me comes first.

Love it. I love how you bundle a lot. There's a lot when you talk about protection. You talk about creditor protections. You're talking about accelerated death benefit. You're talking about the death benefit itself. You're talking about many other aspects of that as well. So Alden, thank you.

The strategy behind this and the objective behind this is to keep money in the family for generations and generations to come. We always talk about two families. We talk about the Vanderbilts and we talk about the Rockefellers. The Rockefellers are a family that have kept generational wealth since the 1800s in their family to this day, billions and billions and billions of dollars of assets, net worth, still in their name because they have used this strategy. Then you have the Vanderbilts on the other side that did not use this strategy, who were wealthier than the Rockefellers at one point in time, and they now do not have anything to their name, their legacy, because they did not use this strategy, except maybe the University of Vanderbilt. The University of Vanderbilt is definitely using this strategy.

So before we dive into your beautiful drawing, I want to just give the concept so that you have a preframe when you're looking at this drawing. The concept is, the trust is owning the life insurance. And essentially every time someone is born into the family, they're getting life insurance on their name, but it's owned by the trust. And so the trust is continuing to fund life insurance. And you're going to continue to compound and control your money. And so you can use it like the banking strategy.

But each kid, regardless if they're a train wreck in life or not, that money after they die, that death benefit goes back to the trust. And so each generation the trust gets larger and larger and larger. This is how some people can use this, from a standpoint of, you know, having life insurance on multiple generations. You're almost guaranteeing, if you do it this way, no matter what happens to one of your kids, based on the setup, each generation will become wealthier and wealthier. And that's why so many people are interested in this, because they get the power of infinite banking and the power of life insurance. But the idea of the waterfall method, i.e. growing and growing your wealth generation to generation guaranteed, is pretty attractive.

I love it. That was a great overview. All right, let's jump in. All right, Caleb did an amazing job of talking about the concept, and now we're going to look into how this can practically go into strategy. So first and foremost, this is not legal advice. This is just sharing with you how the strategy works. Okay, there's three important people when it comes to this concept. Okay, there's going to be the grantor, there's going to be the trustee, and the beneficiary. The grantor is essentially the person that is setting up the trust. Okay, that is the person that is going to pay

the premiums to the trust to then pay the premiums for the life insurance policy. Okay? So, it sounds kind of complicated, but just essentially think if you're the one who sets this up, which will likely be you who are watching this video, you will then pay dollars to the actual trust, which the trustee was then supposed to come in and execute on that, which will then pay the premiums to the life insurance company. So that's when the trust will essentially be funded. So you can see here we have this grantor being pointed to the life insurance trust. You can see dollars going into the trust. Life insurance is inside the trust.

After that, when the grantor dies, right? Because the grantor is the insured. The insured dies, a death benefit is then paid out. When that death benefit is essentially paid out, it's going to pay out to the beneficiary, which is the trust. Dollars are going to funnel to that trust. And once the dollars funneled to that trust, those dollars have to be distributed somewhere. So where are those dollars going to be distributed to? Well, it's exactly what the grantor, the original person who set it up, wanted to happen, even if they are dead.

And so to our right over here, there's a legal document. And there's a box in it that talks about that says this is how the trust operates. So the grantor set up this legal document, is saying I want this to operate exactly how I want, even if I'm alive or dead. Dead or alive, it doesn't really matter. I want the trust to operate in this form or fashion.

How does that actually happen, right? Who's in charge of that? Well, that's where the trustee comes into play. The trustee is the individual who essentially controls the trust, who executes on the grantor's wishes. So if the grantor's wishes was to essentially make sure that when the death benefit gets paid out to the trust as the beneficiary, that more death benefit, more insurance policies are bought on every single person in the family, well then that's exactly how it'll be executed.

So just to summarize, grantor pays for policy premiums, life insurance. When that grantor dies, gets paid out to the beneficiary of the trust, that trust will then buy more life insurance on more people in the family. And then when those people die, those death benefits will then go back to the trust as well, because the beneficiary of those life insurance policies is also the trust. And along the way, the cash value was used for assets, for income, for ways to improve society, way to build bigger, better buildings, churches, schools, give back to charity. And so this is how wealth stays within the family, because it is all controlled and beneficiaried. And it is also creditor protected as well, due to the fact that it's going to be an irrevocable trust where this cannot be reversed once it is set up by the grantor either.

I love it. It's one of those things that it can sound very technical, but really there's three people involved. There's the person that gets it set up. It's the trustee that controls the trust, because the trust could be 100 plus years in the making. So they're the ones that are actually looking at the documents and controlling the trust. And then there's the beneficiary or the person that is getting life insurance, the insured. And those insured also have to have some type of relationship with the trust.

And as our friend Jeremy would say, it's a self-licking ice cream cone. And it's just compounding and compounding and compounding. Do you have anything else to say on this? Because I think I would like to talk about how families, regular families that maybe don't want to set up an irrevocable trust, could use what we call the waterfall method. Yeah, let's do it.

So when we think of like how do you practically use this? You may be watching this and you're like, "Okay, I get it. I want to set this up." We would love to serve you. We would love to help you, and there's ways that you can contact us and learn more about the strategy. But you might be watching this and go, "Okay, I like the concept of each generation becoming wealthier and wealthier." But what we didn't show you in this is there's expenses to maintaining trust. And then there's also when you set up irrevocable trust, there's some negatives involved. And some of the negatives is you're losing some of the flexibility.

And I think this makes sense if you're super wealthy, but if you're a family that maybe has a couple million dollars to your name, and there's even some people that are like, "Are you serious? Like, I don't even have a couple million dollars, but I still want to buy into this, every generation getting wealthier and wealthier." So, here's a really practical way that you can do this. If you're grandparents watching this, and you have kids that are married, and maybe you have grandchildren, and maybe your grandchildren have kids, this will be a perfect example. You are going to most likely die before your kids and your grandchildren.

And let's just say you have life insurance, and whether you utilize your life insurance throughout your life or not, you have a permanent death benefit. And that permanent death benefit is at the top. So think of like the top of the waterfall. And then maybe you have two kids that are married, okay? They both have life insurance with their families, and maybe they have children, and each one of them you buy a life insurance policy when they're little, and it's a compounding machine. So, we'll just keep it three generations for now.

When you pass away, your death benefit is going to pass down to your kids, whether it's in a trust or whether it's them directly. Let's say that they're utilizing their life insurance policy and they have outstanding loans and they're maybe paying for college or buying assets, and maybe they decide they don't want to pay back that loan during that time, but they're getting your death benefit. They could, number one, buy more life insurance, save or invest that money, or what we call backfill their life insurance policies, continuing to create a greater generation. And that ripple effect or that waterfall method, if every person did that. You might have a son or daughter, or you might have a grandchild who is a disaster. But if they have life insurance, they can only be a disaster for so long, and at the end of the day, they will die and that death benefit will pass on regardless of

What they what they've done with their life. Now, and I don't say that in disrespect. Obviously, everyone is valuable in the eyes of God. I'm just more saying this from a standpoint of this is how people can ensure that this is being done. Now, the disadvantage of that, of what I just walked you through, is it just takes one person to decide, "Oh, I don't want to do this." The trust mandates you to be able to do this, and it's very unlikely long term without something like a trust or like a guiding documents that people will maintain this, because early on in life insurance it's not that exciting and you would rather go put your money in other places.

But when you start seeing the legacy and foundation, when we talk about it being a foundational asset, it really amplifies that over 150, 200 years. And I'm just saying that from looking into history, cuz we're babies when it comes to understanding the true benefit of generational wealth. Yeah, Caleb said it great. So in theory, if you are somebody who is at the beginning stage of building wealth still, right? The Rockefellers setting this up, they already had lots to protect, the generations and generations of high-level wealth. If you're somebody who's still building, you're still going to want a lot of that control. You're going to want to be able to use your dollars to go invest in other assets to produce more cash flow that you then can set up something of this complexity, right?

And so what he said is a great way to start off is, hey, let's do the waterfall method without the trust. But I think it is important at some point that the people that are waterfall down are educated enough to understand this concept, but also to understand money, because it's better to teach someone how to fish than give them a fish, right? Because then they can be self-sustained indefinitely and then they can pass that knowledge down to generation. So I actually like a saying that I heard once, which is you don't necessarily pass down wealth to the next generation, you pass down education to the next generation, because you can pass down a bunch of wealth but if that person can squander and lose it all in the blink of an eye within literally a year, which is what the Vanderbilts did.

And so nonetheless, this strategy is an amazing strategy, definitely makes sense for specific individuals. And looking at it from an irrevocable standpoint, when it is irrevocable when you're younger, I think that's a very big disadvantage as well. Cuz life can happen, things can happen, a bunch of things can happen in your life when you're younger to your older, obviously. So a revocable trust in that scenario could make a lot of sense, but then there's some disadvantages along those as well, with in potential like lack of control or, you know, creditor protection can get into it still because it is revocable and can change.

Hey guys, I just want to thank you so much for taking the time to watch our three-hour master class. If this is something that you were like, "This was super valuable," we want to hear from you and some of your biggest takeaways in the comments below. And if you know other people on this journey that are wanting to know more about infinite banking and whole life insurance and how it work and how it should be set up and how the fam, like Rockefeller families, have used this strategy, please share this content. I also want you to know that this is something that we specialize in. And so if you want to learn more about this strategy for your own family, make sure to click the link below and you can literally talk to our team, and we have other resources to learn more. We appreciate you and we hope that you have an incredible rest of your day.