All Forum Posts by: Matt Ruttenberg

I own a 401k administration company if you want to connect on this.  We work with many real estate investors that house RE within their plan.

Acting as a private lender has it's limitation inside of the plan though.  I assume you're self employed?  We're working through this with a client as we speak, and there is a lot of compliance around it.

Feel free to reach out if you have any questions you want to discuss.

@Juan Tonche My company administers self-directed 401ks.  It's all about the plan document, and we use a custom plan document.  We have several clients that do this, with or without employees.

Feel free to reach out, we work with many real estate investors in this capacity.

@Jim K.

What a great question! But it really depends on a number of factors.

Full disclosure, I consult on this type of thing whether it’s for biz owners or RE investors for more estate planning type situations. In other words, how and what is passed on tot he kids.

Some want RE to pass to the kids as is, and some they want to liquidate because of the headaches you mentioned. It’s somewhat determined by their own experiences.

Also, some kids what the RE/business, and the other kids what cash. Or if there are multiple siblings, we ask which ones want which?

Usually, we’re using different types of trusts and entities structures to help with estate taxes, etc. Some are BDITs, SLATs, Charitable LLCs, etc.

Some help with getting out of the 1031 exchange cycle as well or even pass that to the kids or charities. Sometimes this is used for tax planning strategies as well.

Lots of different planning options for those with the same questions. But a very persona choice because there are sooo many paths.

Yeah there are a lot of under informed bloggers and content that don't look at the full picture of how it fits in unfortunately.  It definitely doesn't replace traditional investing, it's a means to other investments honestly.

I dont suggest it if you NEED life insurance, that's what term is for.  Simply because the design doesn't promote death benefit, it promotes cash value growth.

@Sage Weiss

I would consider infinite banking. You’re building up an asset that you can use for buying other assets.

I use this strategy with business owners quite a bit who’ve maxed out their retirement accounts.

Leverage, leverage, leverage!

 Nice work on funding the deal with life insurance!  Such a powerful tool when used right.

Feel free to reach out, I have expertise in the infinite banking and self-directed 401k side of things.  Curious what you're thinking.

Are you referring to the loan from the policy, or the loan to the investor?  The loan from the policy is tax free unless you've MEC'd the policy. 

It all comes in the form of the death benefit as @Thomas Rutkowski explained, but is mostly comprised of the cash value. You'd need to look the numbers to get a better idea of how that works. In a properly formed policy, you're maintaining a ratio between cash value vs. death benefit, which is at the most minimal level.

The concept is that you want to "squash" the death benefit to keep the costs of the insurance down so you are building the cash value to it's full potential.  Thats how you manage the costs, by using the cash value to offset their risk.  We want the cash value to be close to the death benefit.

There are designs that's don't do this, but it's not intended for the purpose of maximizing cash value growth.

As Thomas also mentioned, people with large audiences push the wrong narrative here due to a lack of understanding. 

Yes, I am more of an IUL kind of guy, and there are a few that have either a net 0% loan rate, or a "working loan" where it's still invested, but that has some risks to it as well if there is a down market.

Regarding your other question, you there are some carrier options available where you can roll over the entire amount into a new policy via 1035 exchange and have a waived surrender charge so you have immediate access.  Sometimes the numbers work out, and sometimes it doesn't.  It's a case by case basis honestly.