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Infinite Banking Concept. The use of "properly designed" dividend paying whole life insurance as freedom from the commercial banks.


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Whole Life Insurance is not merely an asset that provides a death benefit. It’s also a cashflow-management device that allows you to free yourself from bondage to commercial bankers.” Where others saw merely protection, Nelson Nash saw a way to become your own banker.

 

Specifically, individuals can build up large “cash surrender values” in whole life policies.  It applies a concept that is becoming foreign, Its called Saving.  Saving not buy now pay later.

Then when they need to make a large purchase, such as a new car or funding a wedding, people practicing IBC will call the insurance company and take out a policy loan. This is a side loan from the insurance company, with the cash surrender value of the life insurance policy acting as collateral.

Whole life insurance, a life policy

There once was a time that the insurance industry stressed the living benefits of dividend-paying whole life insurance from a mutual life insurance companies.

This is a staggering bold headline: “All Life Insurance Lets You Provide For Your Children—Ours Lets You Buy Toys Of Your Own”. That was a realization that it was possible to use these whole life vehicles to fund life needs.  Life Insurance did not have to be a die to win situation.  This advertisement was an exhibit in a senate Hearing before the Subcommittee on Taxation and Debt Management on March 25th, 1988. The final outcome of these proceedings led to a dramatic change in the Internal Revenue Code treatment of life insurance unmatched by any other since the industry’s inception  (footnote 1)  I concede the message was  not politically correct, and flamboyant.  And it facilitated an attack on the wealthy, again.

Now, even our commons sense indeed tells us this advertisement is talking about special benefits for the living, not the dead.  This ad directs the viewer to take a different look at life insurance.  Life insurance for living needs, not just death needs. This ad was very popular in 1987.  It defined life insurance as being able to provide things you need during your life.


Whole life Insurnce, left unchanged in the 1986 tax reform act.

The wealthy wanted to deposit as much as they could in one single deposit.   Like having a 100,000 CD come due and rolling it over in Single Pay Whole Life Insurance Policy.  And being able to use the excess cash, over the cost of insurance, right away to buy things you need or want or to make an investment.

There once was a time that insurance only came in two flavors, term, and whole life, and whole life was the most often selected, such that 85% of life insurance was whole life in 1979. Keep in mind, these were not purchased as INVESTMENT.  People knew what they had, a place to save money, with no risk, that was liquid and no taxes.

The whole life policy was a tax shelter for the wealthy and still is where the wealthy stored their wealth.

 

 

1986 The Reagan Tax Reform Act

 And in 1986 became one of the few tax shelters left for the wealthy.  Money goes in after taxes and never sees the IRS again.  The government never gets its hands on passive growth.   The money grows year after year.  Can be used to buy a car, tax-free.  Can buy a house without using a mortgage, but a policy loan, tax-free.  Can be used for retirement income tax-free.

 

The money grows until the owner dies, and the estate gets the purchased death benefit tax-free

That money can go back into the beneficiary’s Single pay Whole life policy tax-free.  Over and over again.  Is this what was behind the coming attacks on Whole Life Policy’s?  A place the wealthy could store their wealth and the IRS could never get access to.

 

Using life insurance as your private bank, was popular.  So much money that would never be taxed, such that it became a political “strawman” , a  problem that was not a problem.  Make it a problem.  Solve it and tell the naïve public, they fixed it for their good. 

To learn more about the Infinite Banking Concept, Go to the Lara-Murphy Report

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