by Rick Blaine » Fri Jul 14, 2006 09:38 pm
Does anyone here participate in a Equity Index Universal Life Policy with the idea of building up large Cash Value for borrowing? Usually they are heavily overfunded upfront just below MEC limits or Modified Endowment Contract. It is an interesting idea, you'll usually earn anywhere from 4-6% interest or if you pick a more traditional UL or WL one can anticipate 5% from a good Participating W/L carrier like Guardian Insurance.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Posted: Thu Aug 07, 2008 06:41 am Post Subject:
Hi Jake, why not join our community? You can surely add a lot to this community with your expertise.
Posted: Mon Mar 15, 2010 05:03 am Post Subject:
Posted: Mon Mar 15, 2010 05:04 am Post Subject:
Posted: Mon Mar 15, 2010 05:06 am Post Subject:
Posted: Mon Mar 15, 2010 05:07 am Post Subject: UL for IBC?
I would hope that many of these posters have never read Nelsons Book http://veracityfinancial.com/VeracityFinancialInfiniteBanking.aspx.
The best tool to use for IBC is Dividend paying whole life with a non-direct recognition policy. It is important to have flexibility. Most WL policies are less flexible than UL but there are a couple that are.
Posted: Fri Jul 30, 2010 08:06 pm Post Subject: EIUL
Good Equity Indexed life policies work very well for this. Good EIULs are better than participating whole life. This company did not invent this concept. I have been using it for 24 years. You want an EIUL that has more than S&P 500 index and guaranteed zero net cost loans as well as an over loan protection rider. Midland National has 6 different indexes as well as contractually guaranteed zero net cost loans and over loan protection.
The EIULs give you more up side potential than whole life with no risk of loss. And typically better loan arrangements.
This is not a solicitation for business. This is for educational purposes only.
Posted: Sat Jul 31, 2010 02:55 am Post Subject:
Yup sure, but if it's truly trying to educate then maybe you should spend some time reading up on what exactly BOY is. UL doesn't work with BOY because BOY is built on LEAP concepts concerning lost opportunity cost, which means non-direct recogntion of dividends is crucial.
Posted: Sat Jul 31, 2010 03:01 pm Post Subject:
This company did not invent this concept. I have been using it for 24 years
Not with EIUL you haven't.
This is not a solicitation for business. This is for educational purposes only
Good thing.
Most WL policies are less flexible than UL but there are a couple that are.
Really? Name one. By definition a traditional WL policy is inflexible.
People who try to exploit life insurance as a means to subvert taxation and other "rules" of government by promoting the product as something it was not intended to be are responsible for things like Modified Endowment Contracts -- which were invented by Congress as a result of the Tax Reform Act of 1986 and the elimination of tax deductible interest other than on a mortgage. Your "rich uncle" Sam didn't get that way for no reason at all.
Unfortunately, our current crop of Democrats and Republicans (dating back at least 10-12 years or so) have gone a long way toward putting Uncle Sam on a path to be utterly destitute in his old age.
Posted: Sun Aug 01, 2010 03:06 am Post Subject:
Really? Name one. By definition a traditional WL policy is inflexible.
Now I can't let you go on that one. Where in the definition of WL is the word inflexibility?
People who try to exploit life insurance as a means to subvert taxation and other "rules" of government by promoting the product as something it was not intended to be are responsible for things like Modified Endowment Contracts
That's an interesting opinion, but I'd say highlighting the benefits assoicated with the taxability of life insurance cash values, and having it become a popular practice that the government steps in and curtails is a vote of confidence in the power those benefits have, but that's just my opinion.
and the elimination of tax deductible interest other than on a mortgage. Your "rich uncle" Sam didn't get that way for no reason at all.
The top marginal tax rate when from 95% to 35%, the took away tax deduction and exclusions so as not to go bankrupt. Sure they lowered tax rate, did they necessarily lower taxes? Yes probably, but not as much as they'd like to allude given the quoted changes in marginal rates.
Take the tax cuts that were put in place in the last decade. Sure they lowered the marginal rates, but they also significantly aggrevated the AMT. Tax revenues were up, is this the laffer curve at work, or the AMT's burgeoning exposure? Maybe both.
We could always go back to vanishing premium.
Posted: Sun Aug 01, 2010 10:55 am Post Subject:
Where in the definition of WL is the word inflexibility?
It may not be explicitly stated in the definition, but you'll find it in the language of the contract, and what is or is not permitted.
A traditional WL policy neither allows for the policyowner to raise or lower the death benefit ad libitum, nor does it allow changing the premium paying schedule (timing and/or amount).
Obviously, anyone can stop paying premiums any time they want (and use accumulated cash value to pay the premiums until the CV is exhausted), and insurers only allow death benefit increases to those who can qualify for them. But an attempt to reduce the death benefit in a WL policy requires surrendering the contract (or using 1035 exchange) and creating a new contract at an older age, which means a higher rate for a lower benefit.
The entire premise behind UL policies is the "flexibility" inherent in the language in the contract that permits both changing the death benefit, death benefit options, and premium paying schedule (raising, lowering, stopping) -- without having to surrender the original contract. At any point in a UL policy, the cost of insurance is dictated by age, since the underlying insurance "engine" is Annual Renewable Term.
The language of a WL policy specifically states, "Premiums payable to age 100" (or other stated age) or "Premiums payable throughout the lifetime of the insured" or words to that effect. On the other hand a UL policy simply states that only the first premium (the "consideration" required to form the contract) is required. Very different concepts.
A traditional WL policy is intended to "endow" at a stated age, given a fixed, unchanging internal rate of return which does not permit any amount of premium to be paid according to the owner's whim, but a UL policy does, to the extent that it does not create a MEC, because the language of the contract does not specify an "endowment" value. You get what you have in the CV if you get to the endowment age while still living.
So that's the reasoning behind my statement that WL is "inflexible". And it's why UL policies are usually labeled "Flexible Premium Adjustable Life Insurance", while WL policies are lableled, simply, "Whole Life Insurance".
a popular practice that the government steps in and curtails is a vote of confidence in the power those benefits have
No doubt that is true to an extent. But I don't see it as a "seal of approval" either.
The rationale behind the MECs created by the act of Congress in 1986, was that, in part, given the rising popularity of UL and Variable policies in that time period (just as the initial waves of UL policy collapses were beginning to happen, courtesy of declining interest rates in the economy) and the ability to both dump huge amounts of money into the contract and immediately borrow most of it out and deduct the "phantom interest payments" on the loan from one's income tax appeared to be a tax dodge (which it was, albeit lawful at the time).
I'll agree that no one should pay more in taxes than they legitimately owe, and everyone should not fear taking all the deductions to which they are entitled, but the abuse of the tax laws in such a manner as this was not one perpetrated by Joe Bluecollar. It was an exploit of Daddy Warbucks. But it was certainly an exploit that Congress never intended, so they closed the hole in Uncle Sam's pocket.
[And I don't necessarily agree that creating MECs was within the purview of Congress either, but I don't think anyone ever challenged it in court. There were/are many other more practical ways they could have closed the loopholes they created.]
We know that the wealthiest people in America, who do pay the highest marginal tax rates, also pay a smaller percentage of their wealth/income in taxes. I have no argument with that (plenty of others do, and they are the ones who clamor for the wealthy to "pay their fair share" which is mostly a tale of "smoke and mirrors"), because these same people are fueling the economy by employing others, and through their investments.
Take the tax cuts that were put in place in the last decade. Sure they lowered the marginal rates, but they also significantly aggrevated the AMT
Amen to that! AMT is the biggest fraud perpetrated on the taxpaying public in America. And investors, in particular, are perhaps more frequently exposed to the AMT than most others. The number of persons being exposed to the utterly ridiculous AMT is increasing each year, and it's only going to get worse come 1-1-2011 if Congress fails to act before then.
Just wait 'til Congress wraps its grubby little hands around the Value Added Tax (which is wrecking the European economy) as a "new source of revenue" to feed its spending appetite in the future.
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