Whole life or IUL? Infinity banking with Life Insurance

[Alex Xu]

Is anyone familiar with using Life insurance to invest in Real estate? I am looking to open a life insurance policy for Infinity banking concept to invest in real estate. I am debating between Whole life or IUL. Which one is better as a private lender to invest in Real Estate?

Please provide unbias guidance for those familiar with this strategy; thank you.

[Matt Ruttenberg]

Quote from @Nathan Grabau:

The only people who make money with this are the people who are selling the life insurance.

In all of my investigations of this, it has never penciled out for me. Partially because when you loan yourself money out of your cash value, the interest you pay yourself is taxed but not tax deductible. 

Life insurance, including cash value life insurance, is a great estate planning tool. That being said, the additional cost to go from term to whole life insurance, has terrible math that takes years to just break even. Even on an accelerated timetable I think it is 3 or 4 years before the cash value exceeds the additional cash put in to get the cash value out. 

Wanted to touch on the taxable interest part... it's only taxable if it becomes a MEC (modified endowment contract).  Meaning, the IRS sees it becoming an investment, basically just like an annuity.  It would also be taxed if the cash value is simply withdrawn instead of loaned against regardless if it's a MEC or not.

The design of these is a balance between the death benefit and the contribution amount, and not allowing it to become a MEC.  The goal is to "squash" the death benefit while maintaining the tax benefits.

I'd be happy to show you a design where it's completely optimized and show you the difference in commissions when designed properly versus not.  3x less in some cases.