INVESTMENT-GRADE INSURANCE CONTRACTS
An investment-grade insurance contract (IGIC) is a form of insurance. You are able to invest in it untaxed and take money out untaxed. The death benefit will be given to any beneficiaries untaxed also. There is no stock market risk involved and you can use the invested money without any additional fees. The death benefit is permanent and is accessible before death in special circumstances like for medical expenses. The money has already been taxed before it is put in. You cannot use this strategy if you do not have good health. However, you may be able to form a contract for your spouse or child, if they are healthy, with you as the owner. A normal life insurance contributes the premium towards the death benefit. An IGIC contributes the premium towards the cash value, so you will be able to take out more while alive.
Let us compare a standard life insurance and an IGIC. For a standard life insurance, every $1000 invested will save you $125 in taxes. You can only invest a certain amount, and the money invested is liable to economic crashes, meaning all of it can be lost. An IGIC requires no taxes, no limits, and no risks on contributions. There will always be a set amount that you can receive that will be more than what you invested due to around a 4% compound interest. With standard life insurance, you can only take out money once you turn 59 and have to take some out by the time you are 70. That money will be subject to income tax, but if you take money out before 59, you will be penalized with fees and more taxes. With an IGIC, you are free to take out money whenever and for whatever reason. You may also use the cash value as collateral for a low-interest, tax-free loan. The loan allows the money invested to keep growing. Once you pass after investing in a standard life insurance, your beneficiaries will receive the money, it will be subject to income tax. An IGIC death benefit will be greater than the amount you have invested and will be used to pay off your loans. Then, it will be processed without taxes to your beneficiaries. Estate taxes will not have to be paid on the death benefit if your estate is under 11.4 million.
Schedule an appointment with us to start an IGIC. We will start with how much you would like to invest. Then, a contract will be specially created so that the death benefit to cash value is as low as possible. Our fees and commissions will be at the minimum, but you will be receiving many benefits.
- This tax strategy involves avoiding state income tax in one state by "upstreaming" revenue to a subsidiary in a different state that does not have an income tax like Nevada. You have the potential to save thousands depending on which your current income tax rate. For example, California has a 13% maximum income tax rate. If your business income is $150,000, you will lose $19,500 in just income taxes. On the other hand, you can save that $19,500 by introducing tax upstreaming. We suggest consulting us to save your money with this tactic because it is a complicated process.
Indexed Universal Life Insurance
- An Indexed Universal Life Insurance (IUL) which is a whole life insurance is not the same as term life insurance. Term life insurance is only available to a certain length of time, or a term, so it only covers the insured against death for that term. This type of insurance is less costly because there is no cash value connected to it. Once the term ends, the premiums paid to renew the policy become very expensive because you are older. Whole life insurance lasts until your passing, and it comes with a death benefit and a cash value. The premiums are more costly but are adjustable and have no limit. You can withdraw the cash value without penalties if necessary. As mentioned before, an IUL is a type of whole life insurance. The money in the policy is invested into a growth index, and the growth of the policy depends on that of the index. The money is not at risk of losing value if the stock market goes down because there are caps in its growth. This means there will always be a minimum growth. Additionally, the money is only taxed after it has been taken out of the policy.
- Infinite banking is a strategic method of using yourself as a bank. Specifically, your universal life insurance acts as your bank, and you take out a loan against the cash value. Your policy receives money from your premiums and earns interest on top of that. You may also qualify for additional dividends. Insurance companies typically have lower interest rates on loans than actual banks, and you are not taking out the money from inside the policy, allowing it to grow even more. This means you are still earning money from the policy while you pay back the loan. Banks also have more complicated processes for taking out loans while an insurance company has a simple process.
Self-directed Retirement accounts
- A self-directed retirement account is similar to a traditional individual retirement account (IRA). Both make you eligible for tax deductions and the money put in is taxed upon removal. With the self-directed option, you can choose what you are investing in like intellectual property or precious metals.