My Grandfather taught me when I was young how he used his cash value to buy assets and earn a return on his money while it’s in two locations at once. Fast forward in time and I am now in the life insurance industry and doing these strategies myself and for my clients.

Billionaire Robert Kiyosaki talks about how he uses his life insurance to store capital and buy real estate. Kris Krohn also talks about how he uses Dividend paying whole life insurance to buy rental properties.

I wanted to share my thoughts on which Products are best because it depends on the objective.

For those who want to put money into the polices and then take money out within the early years and buy properties:

Dividend paying whole life with a mutual company is best. It has to be max funded and with PUA rider. This is not the type of whole life that Dave Ramsey is always trashing on. This type of whole life creates high early cash value that grows through dividends.

For those who want to store capital or cash flow for long term goals:

Index Universal Life is best. With IULs your money is linked to a stock market index like the s&p500 or Pimco. This allows for tax-free growth based on the performance of an index. As long as you abide by section 7702 of the IRC it will be tax-free.

You can access your money by withdrawals or tax-free loans. Loans are way better and here’s why:

This is like borrowing against the equity in your house but better. Assume you have $1M in cash value and you want to borrow $300k against your $1M. With the companies I work with the loan interest is 5%. This would be $15k on a $300k loan. But if you’re earning an average of 8% on your $1M that’s $80k. The $80k you are earning in the policy pays for the $15k annual interest. So the loan costs nothing out of pocket, is tax-free, and your money is still growing as if you didn’t take anything out. I should also mention that you don’t have to pay back the loan if you don’t want to. You can leave the loan outstanding and then when you die the death benefit of the policy will pay for it.

With the policy that I personally own on myself I have access to a variety of index options. And something really cool is that they have participation rates. Mine has a participation rate of 150%. This means if the index does 10% I will get credited 15%.

Right now I have a very wealthy client and he will be getting one of these policies and plans to put $250k a year into it. It will then create tax-free income in the future, which he plans to use for real estate and other business goals. I know a lot of people in Florida and my state of California who are doing this.

I never would have gotten into this career if it wasn’t for my Grandfather teaching me these strategies. If anybody has any questions or comments feel free to write them.

Los Angeles County, California

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