Tag: Privatized Banking

  • The Tax Advantages of “Safe Zone” Life Insurance Policies

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    The Tax Advantages of “Safe Zone” Life Insurance Policies

    With “Safe Zone Life” insurance, you gain significant tax advantages.  If the policy is utilized correctly, you aren’t taxed on the growth, and you can use it tax-free.

    For this benefit, you pay tax on premium dollars before you put them in the policy.

    Then, your cash value grows tax-deferred, so you don’t owe tax on the growth each year.

    You can use the cash value through loans completely tax-free.

    And when the death benefit is paid to your heirs, it’s completely income-tax-free as well.

    It’s a triple-tax advantaged asset that you pay tax on the seed, but not the harvest.

    However, there are two primary ways to trigger a taxable event inside of a “Safe Zone Life” policy, and both are avoidable.

    One taxable event would be accessing cash value through withdrawals (different than a loan) above your cost basis (what you paid in).

    The other taxable event would be if your policy becomes a Modified Endowment Contract (MEC) by having too little death benefit to support the infusion of cash.

    If your policy becomes a MEC, the tax structure changes, becoming similar to a 401k or qualified plan, where you have to pay tax when you use your money.

    Policies are monitored with MEC tests to raise the death benefit correspondingly, so you overfund up to the maximum without crossing the MEC line.

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  • “IUL” Policies: Pros & Cons

    Privatized Banking Pros & Cons

    The Cons:

    • You do not have access to all of your money for multiple years and in some cases longer if you have substandard health or use tobacco.
    • You are buying life insurance so you have to qualify for the policy.
    • The amount of money available to you can fluctuate throughout the year based on the insurance company’s proprietary calculations, and what indexes are used.
    • If you access cash through a policy loan, you will have to consider the loan interest and the long-term effects on your cash value and death benefit.
    • Though you will have some flexibility, the premiums are payable for multiple years. There is a funding commitment to the policy.
    • If designed incorrectly there could be adverse tax consequences.

    The Pros:

    • You have the potential of earning interest on the money you are otherwise going to spend.
    • You have a permanent death benefit that once paid for is owned by you or your estate.
    • Increasing Death Benefit.  As your cash value increases, so does your Death Benefit.  The effective death benefit will always be net of any outstanding loans.
    • You can earn 5-12+% on money otherwise sitting in the bank earning 0.0-0.75% interest.
    • You have the ability to become independent of banks.
    • Unlike a bank loan, you set the terms of the repayment of the loan.
    • If you are a business owner, you have the advantage of having the money in the policy earn interest while using a loan to invest in your business and earn money on the same dollar.
    • Protection against market crashes.
    • Having your money shielded from creditor demands, lawsuits, judgments, and liens?
    • Built-in tax-free retirement.

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