April 15, 2025 • 35 mins
Episode Guest: Tom Laune
Tom Laune is an experienced financial advisor and nationally recognized speaker specializing in infinite banking and financial strategies. With a unique background as a recording engineer for top musical artists like Bruce Springsteen and Aretha Franklin, Tom transitioned into the financial sector after a pivotal personal experience with a disability policy. He has since gathered numerous financial designations, including being an authorized infinite banking practitioner, dedicated to helping clients achieve financial freedom and security.
Episode Summary:
In this episode of the Teaching Tax Flow podcast, hosts Tom Laune and Chris delve into the intriguing concept of infinite banking and how it intertwines with whole life insurance. Designed for high-income earners, real estate investors, and entrepreneurs aiming to optimize their tax liabilities, this episode explores financial strategies that empower individuals to become their own bankers. The discussion opens with insights into Tom Lonnie's unique professional journey from music to finance, which laid the foundation for his expertise in using insurance as a financial tool.
As the conversation unfolds, the hosts unpack the differences between various types of life insurance, emphasizing the advantages of whole life insurance designed for infinite banking over standard term policies. Through detailed explanations, Tom clarifies complex financial concepts like collateralization and tax advantages. He explores the multifaceted benefits of whole life insurance in tax planning, illuminating its impact on both retirement income and collateral-providing financial decisions. The episode is a treasure trove for anyone looking to maximize their financial strategies through innovative concepts like infinite banking.
Key Takeaways:
- Infinite Banking Concept: Understanding how whole life insurance policies can be used to accumulate wealth and provide flexible financial solutions.
- Comparison with Term Life Insurance: Differentiation between the temporary nature of term insurance and the long-term benefits of whole life insurance.
- Leveraging Cash Value: Utilizing the cash value of whole life insurance as collateral for loans, providing a stable source of funding for personal or investment purposes.
- Tax Advantages: Highlighting the tax-deferred growth and tax-free withdrawals that whole life insurance policies can offer policyholders.
- Entrepreneurial Opportunities: Mixed uses of policy loans by clients, such as investing in businesses or real estate, demonstrating entrepreneurial spirit and financial acumen.
Notable Quotes:
- "I'm telling you, there’s nothing that works quite like infinite banking. It just, it is very unique in the financial world and it has a lot of advantages that most people don't even, aren't even aware that exists." - Tom Laune
- "With a life insurance line of credit, every single year, it goes up and increases so you have access to more capital every year." - Tom Laune
- "You don’t have to ask permission for a loan. You just have that as a guaranteed privilege." - Tom Laune
- "From a taxation perspective, life insurance is based on first in, first out taxation." - Tom Laune
- "Banks, in fact, buy a ton of whole life insurance and they utilize whole life insurance as one of their key assets." - Tom Laune
Resources:
- The Teaching Tax Flow Hub: https://www.teachingtaxflow.com/hub
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
John Tripolsky (00:03):
Hey, everyone, and welcome back to the Teaching
Tax Flow podcast episode 131today. We are gonna look at a
concept referred to as infinitebanking and how exactly whole
life insurance applies to that.But before we get into it, let's
take a brief moment and thankour episode sponsor.
Ad Read (00:22):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
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$75,000 or more of annual taxliability? If so, Strategic
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(00:43):
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sure to tell them TTF sent you.
John Tripolsky (00:53):
Hey, everybody, and welcome back to the teaching
tax flow podcast. As we alwayslike to say here at the
beginning, we have a great topicand a great guest. Of course,
this time, we actually mean itlike we do all the time
naturally. If we didn't have agreat guest or a topic, we'd
kick it to the curb. We don'thave it.
So there you go. There you are.There you have it. We give you
the best stuff we can come upwith. So on this topic today, I
(01:15):
know I'm excited about it.
I know for a fact that Chris isexcited about this one because
he was so excited, he actuallyforgot to invite me to do this
recording with this guestearlier today. So here we are.
And speaking of that, I like tothrow Chris under the bus a
little bit. Right? As everybodyknows here that's been listening
to this now on a 20 somethingepisodes, I've known this
(01:35):
handsome gentleman for twentythree, twenty four years.
So, of course, I like to put itout there publicly that he
forgot to do something becausethat never happens, by the way.
So now it's on record. Sospeaking of that, Chris, I'm
glad you're about a thousandmiles away from me because you
physically can't punch me in thethroat for saying that. But, you
know, welcome welcome back toyour own show, man. How are
doing today?
Chris Picciurro (01:55):
I'm doing amazing. Thanks for thanks for
having thanks for letting myselfinvite myself back. It feels
good.
John Tripolsky (02:02):
You invited yourself to this recording, but
not me. So I see
Chris Picciurro (02:05):
I know this is a really rare thing that I
forgot to invite you to therecording, but we are very we
are both very excited to have anamazing guest. This topic, we've
been sitting on for, honestly, ayear and a half, trying to to
find the perfect resource. And,luckily, if you're listening to
(02:25):
this show, you're lucky.Alright? Because the person
that's going to talk to us aboutinfinite banking and those
concepts today is a nationallyrecognized speaker.
He has you know, he's eitherspeaking in Costa Rica or on a
on an investor cruise. Andluckily for me, when I moved my
(02:45):
family from Detroit area toFranklin, Tennessee, I rented a
little office out because thekids were so young, and we had,
at the time, didn't have a homeoffice. And this gentleman
literally had the office rightnext to me. I owe him countless
premium sparkled waters fromfrom waddling into his office
(03:06):
and stealing. I didn't stealthem because I asked if I could
have them.
But it from from someone thatwas my neighbor, my office
neighbor, developed a friendshipand and actually a a client
relationship. And and Tom, andhis team have helped my wife and
I personally implement, infinitebanking strategies. This helped
(03:29):
us buy our first short termrental property in Florida. So
it's always extra special to meto have someone on here that I
personally work with, and andI'm so excited for Tom to share
his knowledge. So, Tom Lani,thank you so much for joining
the Teaching Tax Flow podcast,and welcome. Thank you so much,
Chris. I'm really excited to behere. I love talking about this
(03:53):
strategy and how it can helppeople because, really, that's
that's what this is all about istrying to figure out what is the
most effective way to helppeople get the most out of what
they have to work with. So I andI love the fact that you do
these podcasts and get the wordout on a bunch of different
unique strategies.
Tom Laune (04:10):
So thanks for having me, Chris.
Chris Picciurro (04:12):
My pleasure. And, you know, before we jump
into the what we're gonna callIBC or Infinite Banking Concept,
Can you give us a little I Ilove your story. I always feel
that and we talk about this inin our practice and that people
don't care how much you knowuntil they know how much you
care. And, I know your journeyto helping people to financial
(04:34):
freedom and to to, implementthese infinite banking concepts
wasn't your traditional route.
John Tripolsky (04:41):
Right. But it's a
Chris Picciurro (04:43):
route and I know, it comes from passion and
comes from experience. So canyou tell us a little bit about
how you got you know, what youstarted doing, when you first
got into your professional lifeand
Tom Laune (04:53):
and how you
Chris Picciurro (04:54):
find yourself where you're at now?
Tom Laune (04:55):
I totally will, Chris. Thank you. So I started
out in a very unique system ofreally not anything to do with
financial products at all. I wasa recording engineer in the
music industry, and I got achance to work with just some
huge wonderful artists over thattime, people like Bruce
(05:16):
Springsteen and REM and thefabulous Thunderbirds and Aretha
Franklin, and the list goes on.I was doing that for twenty nine
years.
And during that time, I had afinancial adviser come to me and
say, hey. You really need to getsome income protection in case
you're ever not able to work.Right? And I didn't know we know
(05:38):
what he was talking about, butthis was just a standard
disability protection policy.But it had a special provision
called an own occupationprovision that protected just my
hearing.
And in the music industrytowards the end of my career, I
did lose hearing in one ear andwas not able to keep going. So I
(06:01):
was like, well, I have thisdisability policy I bought,
like, twenty years earlier. I'mgonna see if it'll work. And lo
and behold, it actually paid offand paid me tax free income. I
think it was for five years, andit was a very generous amount
because I was making a reallygood income in music.
And so I could pretty much doanything new that I wanted to
(06:23):
try to do. So I startedresearching, okay. If I didn't
have this particular thing inplace, which has nothing, by the
way, to do with Infinite BankingRight. If I didn't have this
disability policy in place, Iwouldn't be able to do anything
right now because I don't havethe educational background to do
anything but recordingengineering. And so I went to
(06:45):
school and really tried to learneverything I could about the
financial services industry.
And I ended up getting well,right now, I I have at least
four financial designations. Ijust finished my retirement
income planning specialistdesignation. But the the reason
I did that, Chris, is because Iwanted to help other people not
(07:08):
get in the same lurch that I wasin. And during that process, I
found some unusual strategiesthat ended up I was really,
really attracted to. And one ofthem was this concept of rather
than saving money in atraditional bank, you're saving
money in a life insurancepolicy.
(07:28):
And it absolutely intrigued me,and I was like, okay. I've gotta
learn more about this. So Iended up going to a conference
in Birmingham, Alabama withNelson Nash and a Austrian
economist named Robert Murphy.And it was just so eye opening,
Chris. I can't even tell youbecause I'd never heard anything
(07:50):
like this.
And let me just say, I've beenthrough all the traditional
financial planning that is outthere, all the classes that you
can take in taxes and in ininsurance and everything, and
they don't really touch on thisconcept. So it's pretty lesser
known, I would say, just in thegeneral public, although it's
(08:11):
getting more and more popular.But the reality is is that back
in 2013, which is when Idiscovered it, nobody had ever
heard of it, really. I mean, itwas just pretty much a a fairly
new concept. So I ended upgetting what's called an
authorized infinite bankingpractitioner.
I went through this wholeprogram, and it was the very
(08:31):
first class that they offered todo this. So I've been an
authorized infinite bankingpractitioner literally as long
as anybody on planet earth sincethe whole thing started. And I
continued on with my education,but I'm telling you, there's
nothing that works quite likeinfinite banking. It just it is
(08:52):
very unique in the financialworld, and it has a lot of
advantages that most peopledon't even aren't even aware
that exists. So I know you knowwhat it is, but, that's kinda
how I got into it.
Chris Picciurro (09:06):
No. Absolutely. And there are a lot of tax
advantages. We talk about, taxagencies are are are are
involuntary business partner,one of the three laws of
teaching tax flow. And Yep.
That the the power you know, wedo know our our country's in
debt, and and we do there's asentiment, in the long run that
(09:26):
tax rates are gonna go up. So tobe able to, you know, to be able
to grow assets in a tax taxadvantaged way and then have
tax, you know, liquidityavailable, meaning cash
available to you in a tax freeway, is very powerful. So kind
of piggybacking on the infinitebanking concept, can you give us
(09:47):
an idea of what that even is?Because a lot of, you know, a
lot of listeners, let's quitefrankly, have have thought about
term life insurance. A lot ofthem maybe have life insurance
with their employer, and andwhat we don't realize is that if
your employment terminates forwhatever reason, that then that
policy is gone.
(10:08):
And and this is and a lot ofpeople think that these these
concepts are only for peoplethat are that are older. Now,
luckily, I'm gonna I'm gonnatake share a little secret that
that Tom you know, in in workingwith Tom, John's gonna razz me
for this, but when we moved toNashville, like, nine years ago,
I started I I've always kindaI'm not in my own life, but I've
enjoyed running, and I thought,alright. I'm gonna run the
(10:30):
Nashville Half Marathon, andI've done it a few times. But
the one time specifically, Iwas, like, bound and determined
to get my personal best time,and I was able to do that.
Still, I'm a I'm a turtlecompared to most of these
runners.
But I realized at that time,man, I am, like, in pretty good
shape, and this is, gosh,probably quite a few years ago.
(10:50):
But this is a great time for meto reevaluate my entire
insurance because I know I'mgonna go through a a very I
mean, you know, sometimes peoplewill say, well, gosh. I don't
wanna have to get a physical.Let me tell you something. I
went through this process.
Someone came into my house forfifteen minutes, and that was my
physical exam. You know? And andI got approved as a for for a
very good rate, and that reallyset my wife and I up, you know,
(11:15):
for some for some someadvantages down the road. So the
point is a lot of peoplelistening you kinda ramble down
there. A lot of people listeningmight be thinking, life
insurance, I don't need that.
I'm young. I'm healthy. That'swhen you do really need to
consider doing this. So, yeah,can you tell me a little bit
about what the difference iswith specifically infinite
banking and what, you know, whata lot of our mutual clients
(11:35):
utilize versus a term lifeinsurance from an an employer?
Tom Laune (11:39):
Absolutely. So, well, from an employer, that's
actually what would beconsidered group term coverage.
And, usually, they max that outat about two times your income.
So if you're making a hundredthousand dollars a year, they
usually give you, like, $200,000a year or so in term coverage
from your employer. One of thebig disadvantages of that is
(12:01):
that it's not portable.
There's no portability to it,which means if you leave your
work, then you cannot take thatterm coverage with you. Right?
It just goes it stays with theemployer. So it's not that
advantageous because the chanceof something happening to you
while you're working with thatspecific company is very, very
(12:23):
low. So one of the unique thingsabout term insurance is it has a
very low cost to it, which isgood, and a high coverage amount
if you're getting your ownpersonal term insurance.
But the negative is is thechances of it actually paying
off are around 1%. Right?There's about a 1% chance that
(12:46):
term insurance is actually goingto to pay off. So in other
words, if you were paying athousand dollars a year for
$3,000,000 of term coverage andthat was for ten years, the
chances of anything happening toyou in that ten year window are
extraordinarily small. And thenwhen that ten year window's up,
(13:07):
the price per year jumpsastronomically.
Like, it might jump from athousand dollars to $35,000 the
next year, and the next year, itmight jump another 10,000. So it
just gets to be insanelyexpensive, and nobody keeps it
after that term of years has runup. So I'm not saying there's
anything wrong with terminsurance. In fact, I have a
(13:28):
strategy called the BulletproofWealth strategy, Chris, and I
actually utilize a special typeof term insurance called
convertible term insurance alot. And what that is, it's term
insurance that you lock in yourhealth with, but then you can
switch it over to an infinitebanking style cash accumulation
policy at any time during thatspecific term of years that
(13:52):
you're buying it for.
So it locks in your health andgives you the ability to switch
to a permanent coverage later.That's powerful. Works yeah. It
works amazingly amazingly well.And the thing is term insurance
is simply there's no cash thatis accumulated in it at all.
It's like renting a condo on thebeach. At the end of your stay,
(14:18):
the condo's somebody else's, andyou go away, but you had use of
that condo while you were thereat the beach, which there's
nothing wrong with that becauseyou had a good time. Hey. It's a
fun beach vacation, but you'renot building any wealth doing
that. Right?
It's just pure a pure expense.Does that does that kinda help?
Chris Picciurro (14:36):
Yeah. And and if you think about it, you know,
why do banks allow you to do afive year, seven year ARM?
Right? They're they're hedgingthe risk completely. So if you
get an ARM meaning adjustablerate mortgage.
So if you get a mortgage, it'swith a five or seven year ARM,
after that time period, youeither have to refinance with
the bank or the rate adjustsupwards most likely. So think
(14:58):
about this. When the concept isbe your own bank, lock in your
health, lock in that now, andthen you can convert the term,
like I said, to permanent orwhole life insurance in the
future. So no. That's that'sthat's really neat.
So so when we talk aboutinfinite banking, it it is one
of the first steps, obviously,creating a you know, having a
(15:23):
whole life insurance policy?
Tom Laune (15:25):
So yeah. And it's not just any whole life insurance
policy. So there again, wholelife insurance is built on a
spectrum from the maximum amountof money you can put in for the
least amount of life insuranceis designed to accumulate cash,
and that's what we do. And thenthere's whole life insurance
where it's the least amount ofmoney you can put in for the
(15:47):
most amount of death benefit,and that is just designed for
permanent coverage to have alegacy that you're gonna leave
no matter what. And so infinitebanking, it even goes deeper
than just whole life insurance.
It's about specially designedwhole life insurance. And I do
three primary designs, but I Iwon't get into those right now
(16:07):
because I I feel like it mightbe a little beyond the scope for
this podcast. But the thereality, Chris, is that it works
very similar to a home equityline of credit. And I find that
most people out there understandthe concept of what a home
equity line of credit is. Solet's just say this.
If you had a house that wasworth $500,000, but you only
(16:31):
owed 200,000 on it, you wouldhave $300,000 of equity. So you
could take that equity and tapinto it and get a line of credit
and borrow against the value ofyour house. Okay? That's what a
home equity line of credit does,And you would be paying the bank
interest for the use of theirmoney, and then you would be
(16:52):
going out and doing whatever youwanted with that capital. And
the the deal with infinitebanking is it's the same thing,
same concept as a home equityline of credit, but you're
you're now building equityinside of a specially designed
life insurance policy that youcan then collateralize that
equity, borrow against it, andthen go out and do something
(17:17):
with it, like buy a a house orfix and flip, or I have all
different kinds of people thatdo this for small businesses or
any number of things.
But the key to this is thatbecause it's a mutually owned
company, you are a part owner,and you get dividends every year
that causes compounding growthinside of the policy. And you
(17:42):
don't get that if you're justborrowing from a home equity
line of credit. There's youknow, you don't own that bank
that is getting giving you thehome equity line of credit, but
you do have a part ownership ora mutual ownership in the
insurance policy, and that's whyyou get dividends. So there's a
couple of other differencesbetween a home equity line of
(18:04):
credit and this kind of cash.This really, it's a cash value
line of credit is what it is,that is that with a home equity
line of credit, it does notautomatically go up every year.
In other words, if you have a$200,000 home equity line of
credit, it's not gonna changeunless you go get another
appraisal on your house. You goto the bank and say, may I
(18:26):
please have a larger home equityline of credit? They do all
these credit checks andfinancial underwriting on you,
and then they decide whether ornot you get approved for it.
With a life insurance line ofcredit, every single year, it
goes up and increases. So youhave access to more capital
every year, and it worksamazingly well because the
(18:49):
becoming your own bank part ofit is that you don't have to ask
permission for that line ofcredit to go up.
You don't have to ask permissionfor a loan. You just have that
as a guaranteed privilege. Andthe other thing is is the rates
are a lot more attractive. Like,right now, the main company I
work with, the rate is 5.3, andit's obviously lower than a
(19:15):
traditional home equity line ofcredit right now by probably
two, two and a half points. Soyou got a lower rate because the
collateral is more secure.
Chris Picciurro (19:24):
Is it?
Tom Laune (19:24):
And you have guaranteed growth in the policy.
And then if something happens toyou, let's just say you had a
$2,000,000 life insurance policyand you had an outstanding loan
of $200,000, what's gonnahappen, Chris, is that the death
benefit will pay that loan off,and your beneficiary would end
up with 1,800,000.0. So that'swhy this is a great collateral,
(19:50):
and that's why everybody, youknow, in the financial world
loves cash value of whole lifeas collateral because it's
incredibly secure. The worstcase scenario is that you pass
away, and then all of a sudden,millions of dollars come, you
know, into being that weren'tthere before, and that pays off
any outstanding loan. Does that
Ad Read (20:09):
make sense?
Chris Picciurro (20:10):
Yeah. From a tax perspective, I want people
to think about that, one, worstcase scenario, you pass away.
Your your family ends up with acouple million dollars or more,
you know, depending on yoursituation. Yep. Unless it's a
unless we're talking you know,unless you have a taxable state,
which is pretty rare, that's alltax free money, by the way.
That's all tax free.
Tom Laune (20:31):
Yes.
Chris Picciurro (20:32):
The and and I want you just if you're
listening, thinking about if youyou know, we we talk about
HELOC. Right? And the HELOC andand but, you know, if if the
mortgage if the value of yourhome decreases, your loan to
value could decrease. With withlife insurance, you basically go
through underwriting one time.It doesn't matter what happens
to you after that, and it can'tthey can't come back and say,
(20:54):
you know what?
No. You're not as healthy as youused to be. You don't make as
much money as you used to make,so we're gonna decrease your
value. So, again, kinda the consof the the concept is your take
your take becoming your ownbank, and, you know, and this
works really well, you know, forfor a lot of people, but
especially, like, real estateinvestors and entrepreneurs.
I've been in business twenty twoand a half years, and and every
time I go and get a mortgage,I've never really had a problem
(21:17):
with it, but there's a lot ofanxiety.
Right? Because there's just asyou know, Tom, there's a lot
more red tape we have to gothrough as entrepreneurs. So you
mentioned that so I wanna touchon something that that cash
accumulates in this lifeinsurance policy, and and people
are paid dividends. Is it my myunderstanding that those
dividends are tax free as longwhile they stay in the policy?
Tom Laune (21:40):
Yeah. The the internal buildup or the cash
accumulation in the policy istax advantaged. And and the why
I say advantaged and not free isbecause eventually, Chris, in
all of these policies, there'sgoing to be a a greater amount
of capital or cash inside thepolicy than your basis. And then
(22:02):
your basis is just how muchmoney you put into it. Right?
So if you surrendered it and youhad a million dollars of basis
and $2,000,000 of cash value,then there would be a capital
gain of a million dollars. But Iget around that completely
because this also provides a taxfree retirement income stream.
(22:24):
And so in retirement, the way itworks from a taxation
perspective is that lifeinsurance is based on first in,
first out taxation. So we canwithdraw the basis or the money
we put into that in premiumdollars out first in retirement.
And then once we have no moneyin it anymore from a basis
(22:44):
perspective and it's all capitalgains, then we take loans
against it for the rest ofretirement, and it builds up
this enormous loan balance,usually in the millions of
dollars.
And then rather than paying thatloan off, eventually, people
pass away, and the lifeinsurance pays off the loan tax
(23:04):
free, and the balance of theloan goes to the beneficiary.
Wow. So that's how it's provideda tax free retirement income and
a tax advantaged accumulation.
Chris Picciurro (23:16):
And no. That's very important. And then let's
talk about the loan part for aminute. You know? Yeah.
Let's assume you've accumulateda cash value, and you Yep. You
take a distribution as a loan.Now that's not a taxable event.
You do pay a 5.3% interest,which is less than most mortgage
HELOCs and and that sort ofstuff. But when you pay your
(23:36):
when you pay that line loanback, you're paying yourself
interest, I believe.
Are you you're you're paying thefive
Tom Laune (23:44):
point So I'll explain this how it works. This is a
little bit complicated and oneof the things that people get
confused about about this. Sothe interest is paid to the
insurance company. The insurancecompany takes that, and that is
profit to them, and they returntheir profit back to you in the
form of a dividend. So it's notone to one, though.
(24:06):
It's not I paid 5,000 of dollarsof interest, and now I get a
$5,000 dividend. It doesn't worklike that. It's I pay $5,000 of
interest that goes into thegeneral account. They look at
their mortality and expensecharges, and then they determine
how much dividend they're gonnapay, and they return it back to
the policyholder. So it's verymuch you're not paying interest
(24:29):
to yourself.
Okay? That's one of the thingsthat people get confused about
with this. You're payinginterest to the insurance
company, but you are stillgetting a dividend even when you
have a loan outstanding. Andkind of to to bring this back to
the HELOC analogy, your house,if you had a HELOC of $200,000
(24:51):
and a $500,000 house, and youtook that $200,000 and went and
bought a rental property withit, and then your house went up
in value, you're still gettingthe appreciation on the house.
Right?
And you have the rentalproperty. But with a house, as
we saw from 02/1989, they can godown in value too, believe it or
(25:12):
not. Right? Most people nowdon't think that's possible, but
we all know that houses are notguaranteed to go up in value.
But with life insurance, likeyou said, Chris, it is
guaranteed to go up in value.
It never can go down, whichmeans it's more stable
collateral with less risk, andthat's why they can charge a
lower interest rate. You'renever gonna get backwards on it.
Chris Picciurro (25:37):
And what are you finding your your clients
are utilizing? You know, I mean,you don't have to take the loan.
Right? You could just let it sitin there and get paid tax free
dividends, which I I know youcan't say what the dividend
amount is because it it just itfluctuates. I will say mine's,
you know, at about six, six anda half percent because I'll
speak personally.
(25:57):
Yeah. You the money could justsit in there dividend. But for
the people that take advantageof the loan provision, which is
a which is not consideredtaxable income, what are what
are your what are your clientstypically using those proceeds
for in general?
Tom Laune (26:15):
That's a great question. So either they use it
for some okay. I'll just giveyou a broad category. Something
they can control. Okay?
So I personally don't recommendtaking loans from your life
insurance policy and, forexample, buying stocks that you
have no idea if they're gonnacrash tomorrow or not. Right?
(26:37):
It's there's too much riskinvolved in that. But if you
have a small business that youknow you have a product you can
mark up and you need to buyinventory with it, or I have
just a wide variety of thingswhere you are in somewhat
control over it, or even if youwere gonna go buy a rental house
where you knew the the area andyou felt really good about the
(27:00):
the loan to value and how muchyou were gonna get a good deal
for, and you could fix it up,and you might be buying a
distressed asset. Those thingsyou are in more control over,
and that is what most of myclients use their policies for.
It's just something they have adegree of control over, and and
it's not wild speculation. Anddefinitely not it's not a great
(27:25):
idea to take loans fordepreciating assets. Like, for
example, I'm gonna take a$40,000 loan. I'm gonna take my
whole family and extended familyto Hawaii for two weeks. Because
at the at the end of that time,you got nothing.
You had the fun, but now you owethe 40,000 back. So, Chris, let
(27:45):
me touch on this real quick.There's a concept called
interest rate arbitrage, andwhat that means is that you're
trying to get in your investmentthat you take a loan from your
policy for a higher return thanyou're paying in interest. So if
you could get a 10.6% return andyou were paying the insurance
(28:06):
company 5.3%, your actualeffective rate of return on that
deal is a % because you're doingwhat's called interest rate
arbitrage. And I'm not gonna goway into the weeds on this, but
people generally miss thispoint.
Right? This is how banks makemoney. Banks do not make money
(28:28):
by earning a quarter of apercent. Okay? That's what
people think.
Oh, I I'm you know, they'repaying me 5%, and I'm loaning
money at five and a quarterpercent. I must be they must be
only making a quarter percent.No. They're making the spread
because they're not lending outtheir own money. They're lending
out their depositors' money.
(28:49):
Okay? Banks, in fact, buy a tonof whole life insurance, and
they utilize whole lifeinsurance as one of their key
assets. It's called BOLI or bankowned life insurance. So I teach
people about how they canutilize interest rate arbitrage
to radically increase theirreturns. Does that make sense?
(29:10):
Absolutely.
Chris Picciurro (29:12):
And to kind of, you know, wrap that up and just
say, I'm sure if you'relistening to this still, which
you should be. And if you're notlistening to it, you didn't make
hear me say that you should be.But, you know, when at what
point when when are the topthree or four times that someone
listening to this should was ita good idea to really look at
(29:37):
this concept and and considerit?
Tom Laune (29:39):
That is an awesome question. So number one, this is
something you have to be awareof, is that you have to have a
reasonable you don't have to bein perfect health, Chris, but
you have to be in reasonablehealth for this to make sense.
Right? You know, you can't havejust had a major health incident
like cancer or something likethat in the last couple of
years. So you were very smart towhile you knew you were in good
(30:04):
health prepping for thatmarathon to go ahead and get
underwritten.
It was great. Right now, we'reseeing a lot of clients because
of the new technologies outthere. They're able to do
electronic underwriting, and youdon't even have to have a
medical exam. And that could goup to $7,500,000 of life
insurance with no medical exam.In fact, that just happened last
(30:25):
week.
I had a husband and a wife bothget $7,500,000, no medical exam.
So it does happen, and it'sreally cool. So you may not even
have to have that. So you wannahave reasonable health, number
one. And number two, you have tobe somewhat entrepreneurially
minded.
Meaning, like, you can do thisand just let the money
(30:47):
accumulate the cash accumulatein a policy and never do
anything with it. But if youwanna maximize this strategy,
you really wanna have some sortof either small business or
entrepreneurial in theinclination that would allow you
to want to to leverage it forsomething that you want to have
happen in your life from aninvestment perspective. Like, I
(31:10):
don't use the I word ofinvestment because nothing I do
carries a lot of risk with it atall. It's very, very, very, very
low risk. I think it's evenlower risk than putting money in
a bank.
But when you take a loan,whatever you put that money into
is the investment. Right? It'seither a small business or real
estate or some you know, one ofthe things my clients do a lot
(31:34):
is they do private lending. Soif they can lend their money
out, and I've done this in thepast too, at 15% return and pay
5.3%, then you're gettingalmost, you know, 200% rate of
return on your money. So it's avery good thing for that.
So just to wrap this up, there'sthree things that this thing
(31:55):
accomplishes. It guarantees cashvalue growth. It serves as
collateral for otherinvestments, and it gives you a
legacy for your family tax free.So it accomplishes three things
at once, and that's anincredibly powerful use of, you
know, putting your dollars towork at more than one place at a
(32:18):
time.
Chris Picciurro (32:18):
Absolutely. And and, you know, you you know, so
so and if someone's has meetsthose criteria and you're
sitting, you know, have moneymaybe in a bank savings account,
money market earning a verysmall amount of interest also,
by the way, that's fully taxableversus you know, you might as
well be tax efficient. So Yep.Man, I really appreciate it, and
(32:41):
I I've learned a lot even thoughI've been doing this.
Tom Laune (32:44):
That's great.
Chris Picciurro (32:44):
Chris, I've
John Tripolsky (32:45):
been sitting here basically in silence the
whole time that Tom, youexplained that really, really
well and kinda you know, youmentioned the three things, so I
kinda think of it, you know, asthe trifecta. Yes. Which is
basically the you know, I lovethat term trifecta because it's
like three wins right on thescoreboard all in one time.
Chris Picciurro (33:01):
But Mhmm.
John Tripolsky (33:01):
The way you describe that, but then also
just the process on how it allworks. You did a great job
explaining that. Because, Chris,you know, to your your question
you had asked, I honestlythought that was the case. Like,
you're paying yourself interest.But then the more you think
about it, you're like, well, howwould that even work?
Like, how do how do how doesthis even exist? Right? You're
you're not adding any fuel tothe the operational tank, if you
(33:23):
will, for somebody to managethis thing because they're not
making any money.
Chris Picciurro (33:26):
Right.
John Tripolsky (33:26):
You do a great job. And, yeah, if if anybody's
interested in this, I mean,we'll make it pretty easy for
you. We'll actually drop a, alink right in the show notes,
and you can go directly to theteaching tax flow hub. So what
that is is you'll see it whenyou go on it. It'll have a a
list of things you may beinterested in.
Click on them, and we're happyto make introductions for you.
So it saves you the the troubleof having to trust, the Google,
(33:50):
as my grandmother would havesaid. You don't have to go on
search for it. We we actuallyhave somebody like Tom. I know I
know you're part of thatecosystem with us there, and,
yeah, we make it pretty easy.
So anybody that's in theaudience listening or watching
this will, again, put that linkin these show notes to the
Teaching Tax Flow hub, and checkit out. Let us know what you
think, and let us know what wecan do to to help you. And, you
know, Tom, we'll have to haveyou back on again here after a
(34:13):
while and kinda maybe do a do atwo point o, a recap, or dive a
little deeper into some of theseconcepts as well. Absolutely.
And we'll let Chris come backtoo, I guess.
Chris Picciurro (34:25):
So Thank you.
John Tripolsky (34:28):
Yes. I'm coughing over here. It's it's
like my joke. I make myselflaugh. But, yeah, everybody
definitely check out theteaching tax flow hub, and we'll
see everybody back here again onthe podcast next week.
Different time roughly,completely different topic. Have
a great week, everybody.
Disclaimer (34:45):
The content provided is for educational only. We
encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(35:06):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
Hey, everyone, and welcome back to the Teaching
Tax Flow podcast episode 131today. We are gonna look at a
concept referred to as infinitebanking and how exactly whole
life insurance applies to that.But before we get into it, let's
take a brief moment and thankour episode sponsor.
Ad Read (00:22):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
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$75,000 or more of annual taxliability? If so, Strategic
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sure to tell them TTF sent you.
John Tripolsky (00:53):
Hey, everybody, and welcome back to the teaching
tax flow podcast. As we alwayslike to say here at the
beginning, we have a great topicand a great guest. Of course,
this time, we actually mean itlike we do all the time
naturally. If we didn't have agreat guest or a topic, we'd
kick it to the curb. We don'thave it.
So there you go. There you are.There you have it. We give you
the best stuff we can come upwith. So on this topic today, I
(01:15):
know I'm excited about it.
I know for a fact that Chris isexcited about this one because
he was so excited, he actuallyforgot to invite me to do this
recording with this guestearlier today. So here we are.
And speaking of that, I like tothrow Chris under the bus a
little bit. Right? As everybodyknows here that's been listening
to this now on a 20 somethingepisodes, I've known this
(01:35):
handsome gentleman for twentythree, twenty four years.
So, of course, I like to put itout there publicly that he
forgot to do something becausethat never happens, by the way.
So now it's on record. Sospeaking of that, Chris, I'm
glad you're about a thousandmiles away from me because you
physically can't punch me in thethroat for saying that. But, you
know, welcome welcome back toyour own show, man. How are
doing today?
Chris Picciurro (01:55):
I'm doing amazing. Thanks for thanks for
having thanks for letting myselfinvite myself back. It feels
good.
John Tripolsky (02:02):
You invited yourself to this recording, but
not me. So I see
Chris Picciurro (02:05):
I know this is a really rare thing that I
forgot to invite you to therecording, but we are very we
are both very excited to have anamazing guest. This topic, we've
been sitting on for, honestly, ayear and a half, trying to to
find the perfect resource. And,luckily, if you're listening to
(02:25):
this show, you're lucky.Alright? Because the person
that's going to talk to us aboutinfinite banking and those
concepts today is a nationallyrecognized speaker.
He has you know, he's eitherspeaking in Costa Rica or on a
on an investor cruise. Andluckily for me, when I moved my
(02:45):
family from Detroit area toFranklin, Tennessee, I rented a
little office out because thekids were so young, and we had,
at the time, didn't have a homeoffice. And this gentleman
literally had the office rightnext to me. I owe him countless
premium sparkled waters fromfrom waddling into his office
(03:06):
and stealing. I didn't stealthem because I asked if I could
have them.
But it from from someone thatwas my neighbor, my office
neighbor, developed a friendshipand and actually a a client
relationship. And and Tom, andhis team have helped my wife and
I personally implement, infinitebanking strategies. This helped
(03:29):
us buy our first short termrental property in Florida. So
it's always extra special to meto have someone on here that I
personally work with, and andI'm so excited for Tom to share
his knowledge. So, Tom Lani,thank you so much for joining
the Teaching Tax Flow podcast,and welcome. Thank you so much,
Chris. I'm really excited to behere. I love talking about this
(03:53):
strategy and how it can helppeople because, really, that's
that's what this is all about istrying to figure out what is the
most effective way to helppeople get the most out of what
they have to work with. So I andI love the fact that you do
these podcasts and get the wordout on a bunch of different
unique strategies.
Tom Laune (04:10):
So thanks for having me, Chris.
Chris Picciurro (04:12):
My pleasure. And, you know, before we jump
into the what we're gonna callIBC or Infinite Banking Concept,
Can you give us a little I Ilove your story. I always feel
that and we talk about this inin our practice and that people
don't care how much you knowuntil they know how much you
care. And, I know your journeyto helping people to financial
(04:34):
freedom and to to, implementthese infinite banking concepts
wasn't your traditional route.
John Tripolsky (04:41):
Right. But it's a
Chris Picciurro (04:43):
route and I know, it comes from passion and
comes from experience. So canyou tell us a little bit about
how you got you know, what youstarted doing, when you first
got into your professional lifeand
Tom Laune (04:53):
and how you
Chris Picciurro (04:54):
find yourself where you're at now?
Tom Laune (04:55):
I totally will, Chris. Thank you. So I started
out in a very unique system ofreally not anything to do with
financial products at all. I wasa recording engineer in the
music industry, and I got achance to work with just some
huge wonderful artists over thattime, people like Bruce
(05:16):
Springsteen and REM and thefabulous Thunderbirds and Aretha
Franklin, and the list goes on.I was doing that for twenty nine
years.
And during that time, I had afinancial adviser come to me and
say, hey. You really need to getsome income protection in case
you're ever not able to work.Right? And I didn't know we know
(05:38):
what he was talking about, butthis was just a standard
disability protection policy.But it had a special provision
called an own occupationprovision that protected just my
hearing.
And in the music industrytowards the end of my career, I
did lose hearing in one ear andwas not able to keep going. So I
(06:01):
was like, well, I have thisdisability policy I bought,
like, twenty years earlier. I'mgonna see if it'll work. And lo
and behold, it actually paid offand paid me tax free income. I
think it was for five years, andit was a very generous amount
because I was making a reallygood income in music.
And so I could pretty much doanything new that I wanted to
(06:23):
try to do. So I startedresearching, okay. If I didn't
have this particular thing inplace, which has nothing, by the
way, to do with Infinite BankingRight. If I didn't have this
disability policy in place, Iwouldn't be able to do anything
right now because I don't havethe educational background to do
anything but recordingengineering. And so I went to
(06:45):
school and really tried to learneverything I could about the
financial services industry.
And I ended up getting well,right now, I I have at least
four financial designations. Ijust finished my retirement
income planning specialistdesignation. But the the reason
I did that, Chris, is because Iwanted to help other people not
(07:08):
get in the same lurch that I wasin. And during that process, I
found some unusual strategiesthat ended up I was really,
really attracted to. And one ofthem was this concept of rather
than saving money in atraditional bank, you're saving
money in a life insurancepolicy.
(07:28):
And it absolutely intrigued me,and I was like, okay. I've gotta
learn more about this. So Iended up going to a conference
in Birmingham, Alabama withNelson Nash and a Austrian
economist named Robert Murphy.And it was just so eye opening,
Chris. I can't even tell youbecause I'd never heard anything
(07:50):
like this.
And let me just say, I've beenthrough all the traditional
financial planning that is outthere, all the classes that you
can take in taxes and in ininsurance and everything, and
they don't really touch on thisconcept. So it's pretty lesser
known, I would say, just in thegeneral public, although it's
(08:11):
getting more and more popular.But the reality is is that back
in 2013, which is when Idiscovered it, nobody had ever
heard of it, really. I mean, itwas just pretty much a a fairly
new concept. So I ended upgetting what's called an
authorized infinite bankingpractitioner.
I went through this wholeprogram, and it was the very
(08:31):
first class that they offered todo this. So I've been an
authorized infinite bankingpractitioner literally as long
as anybody on planet earth sincethe whole thing started. And I
continued on with my education,but I'm telling you, there's
nothing that works quite likeinfinite banking. It just it is
(08:52):
very unique in the financialworld, and it has a lot of
advantages that most peopledon't even aren't even aware
that exists. So I know you knowwhat it is, but, that's kinda
how I got into it.
Chris Picciurro (09:06):
No. Absolutely. And there are a lot of tax
advantages. We talk about, taxagencies are are are are
involuntary business partner,one of the three laws of
teaching tax flow. And Yep.
That the the power you know, wedo know our our country's in
debt, and and we do there's asentiment, in the long run that
(09:26):
tax rates are gonna go up. So tobe able to, you know, to be able
to grow assets in a tax taxadvantaged way and then have
tax, you know, liquidityavailable, meaning cash
available to you in a tax freeway, is very powerful. So kind
of piggybacking on the infinitebanking concept, can you give us
(09:47):
an idea of what that even is?Because a lot of, you know, a
lot of listeners, let's quitefrankly, have have thought about
term life insurance. A lot ofthem maybe have life insurance
with their employer, and andwhat we don't realize is that if
your employment terminates forwhatever reason, that then that
policy is gone.
(10:08):
And and this is and a lot ofpeople think that these these
concepts are only for peoplethat are that are older. Now,
luckily, I'm gonna I'm gonnatake share a little secret that
that Tom you know, in in workingwith Tom, John's gonna razz me
for this, but when we moved toNashville, like, nine years ago,
I started I I've always kindaI'm not in my own life, but I've
enjoyed running, and I thought,alright. I'm gonna run the
(10:30):
Nashville Half Marathon, andI've done it a few times. But
the one time specifically, Iwas, like, bound and determined
to get my personal best time,and I was able to do that.
Still, I'm a I'm a turtlecompared to most of these
runners.
But I realized at that time,man, I am, like, in pretty good
shape, and this is, gosh,probably quite a few years ago.
(10:50):
But this is a great time for meto reevaluate my entire
insurance because I know I'mgonna go through a a very I
mean, you know, sometimes peoplewill say, well, gosh. I don't
wanna have to get a physical.Let me tell you something. I
went through this process.
Someone came into my house forfifteen minutes, and that was my
physical exam. You know? And andI got approved as a for for a
very good rate, and that reallyset my wife and I up, you know,
(11:15):
for some for some someadvantages down the road. So the
point is a lot of peoplelistening you kinda ramble down
there. A lot of people listeningmight be thinking, life
insurance, I don't need that.
I'm young. I'm healthy. That'swhen you do really need to
consider doing this. So, yeah,can you tell me a little bit
about what the difference iswith specifically infinite
banking and what, you know, whata lot of our mutual clients
(11:35):
utilize versus a term lifeinsurance from an an employer?
Tom Laune (11:39):
Absolutely. So, well, from an employer, that's
actually what would beconsidered group term coverage.
And, usually, they max that outat about two times your income.
So if you're making a hundredthousand dollars a year, they
usually give you, like, $200,000a year or so in term coverage
from your employer. One of thebig disadvantages of that is
(12:01):
that it's not portable.
There's no portability to it,which means if you leave your
work, then you cannot take thatterm coverage with you. Right?
It just goes it stays with theemployer. So it's not that
advantageous because the chanceof something happening to you
while you're working with thatspecific company is very, very
(12:23):
low. So one of the unique thingsabout term insurance is it has a
very low cost to it, which isgood, and a high coverage amount
if you're getting your ownpersonal term insurance.
But the negative is is thechances of it actually paying
off are around 1%. Right?There's about a 1% chance that
(12:46):
term insurance is actually goingto to pay off. So in other
words, if you were paying athousand dollars a year for
$3,000,000 of term coverage andthat was for ten years, the
chances of anything happening toyou in that ten year window are
extraordinarily small. And thenwhen that ten year window's up,
(13:07):
the price per year jumpsastronomically.
Like, it might jump from athousand dollars to $35,000 the
next year, and the next year, itmight jump another 10,000. So it
just gets to be insanelyexpensive, and nobody keeps it
after that term of years has runup. So I'm not saying there's
anything wrong with terminsurance. In fact, I have a
(13:28):
strategy called the BulletproofWealth strategy, Chris, and I
actually utilize a special typeof term insurance called
convertible term insurance alot. And what that is, it's term
insurance that you lock in yourhealth with, but then you can
switch it over to an infinitebanking style cash accumulation
policy at any time during thatspecific term of years that
(13:52):
you're buying it for.
So it locks in your health andgives you the ability to switch
to a permanent coverage later.That's powerful. Works yeah. It
works amazingly amazingly well.And the thing is term insurance
is simply there's no cash thatis accumulated in it at all.
It's like renting a condo on thebeach. At the end of your stay,
(14:18):
the condo's somebody else's, andyou go away, but you had use of
that condo while you were thereat the beach, which there's
nothing wrong with that becauseyou had a good time. Hey. It's a
fun beach vacation, but you'renot building any wealth doing
that. Right?
It's just pure a pure expense.Does that does that kinda help?
Chris Picciurro (14:36):
Yeah. And and if you think about it, you know,
why do banks allow you to do afive year, seven year ARM?
Right? They're they're hedgingthe risk completely. So if you
get an ARM meaning adjustablerate mortgage.
So if you get a mortgage, it'swith a five or seven year ARM,
after that time period, youeither have to refinance with
the bank or the rate adjustsupwards most likely. So think
(14:58):
about this. When the concept isbe your own bank, lock in your
health, lock in that now, andthen you can convert the term,
like I said, to permanent orwhole life insurance in the
future. So no. That's that'sthat's really neat.
So so when we talk aboutinfinite banking, it it is one
of the first steps, obviously,creating a you know, having a
(15:23):
whole life insurance policy?
Tom Laune (15:25):
So yeah. And it's not just any whole life insurance
policy. So there again, wholelife insurance is built on a
spectrum from the maximum amountof money you can put in for the
least amount of life insuranceis designed to accumulate cash,
and that's what we do. And thenthere's whole life insurance
where it's the least amount ofmoney you can put in for the
(15:47):
most amount of death benefit,and that is just designed for
permanent coverage to have alegacy that you're gonna leave
no matter what. And so infinitebanking, it even goes deeper
than just whole life insurance.
It's about specially designedwhole life insurance. And I do
three primary designs, but I Iwon't get into those right now
(16:07):
because I I feel like it mightbe a little beyond the scope for
this podcast. But the thereality, Chris, is that it works
very similar to a home equityline of credit. And I find that
most people out there understandthe concept of what a home
equity line of credit is. Solet's just say this.
If you had a house that wasworth $500,000, but you only
(16:31):
owed 200,000 on it, you wouldhave $300,000 of equity. So you
could take that equity and tapinto it and get a line of credit
and borrow against the value ofyour house. Okay? That's what a
home equity line of credit does,And you would be paying the bank
interest for the use of theirmoney, and then you would be
(16:52):
going out and doing whatever youwanted with that capital. And
the the deal with infinitebanking is it's the same thing,
same concept as a home equityline of credit, but you're
you're now building equityinside of a specially designed
life insurance policy that youcan then collateralize that
equity, borrow against it, andthen go out and do something
(17:17):
with it, like buy a a house orfix and flip, or I have all
different kinds of people thatdo this for small businesses or
any number of things.
But the key to this is thatbecause it's a mutually owned
company, you are a part owner,and you get dividends every year
that causes compounding growthinside of the policy. And you
(17:42):
don't get that if you're justborrowing from a home equity
line of credit. There's youknow, you don't own that bank
that is getting giving you thehome equity line of credit, but
you do have a part ownership ora mutual ownership in the
insurance policy, and that's whyyou get dividends. So there's a
couple of other differencesbetween a home equity line of
(18:04):
credit and this kind of cash.This really, it's a cash value
line of credit is what it is,that is that with a home equity
line of credit, it does notautomatically go up every year.
In other words, if you have a$200,000 home equity line of
credit, it's not gonna changeunless you go get another
appraisal on your house. You goto the bank and say, may I
(18:26):
please have a larger home equityline of credit? They do all
these credit checks andfinancial underwriting on you,
and then they decide whether ornot you get approved for it.
With a life insurance line ofcredit, every single year, it
goes up and increases. So youhave access to more capital
every year, and it worksamazingly well because the
(18:49):
becoming your own bank part ofit is that you don't have to ask
permission for that line ofcredit to go up.
You don't have to ask permissionfor a loan. You just have that
as a guaranteed privilege. Andthe other thing is is the rates
are a lot more attractive. Like,right now, the main company I
work with, the rate is 5.3, andit's obviously lower than a
(19:15):
traditional home equity line ofcredit right now by probably
two, two and a half points. Soyou got a lower rate because the
collateral is more secure.
Chris Picciurro (19:24):
Is it?
Tom Laune (19:24):
And you have guaranteed growth in the policy.
And then if something happens toyou, let's just say you had a
$2,000,000 life insurance policyand you had an outstanding loan
of $200,000, what's gonnahappen, Chris, is that the death
benefit will pay that loan off,and your beneficiary would end
up with 1,800,000.0. So that'swhy this is a great collateral,
(19:50):
and that's why everybody, youknow, in the financial world
loves cash value of whole lifeas collateral because it's
incredibly secure. The worstcase scenario is that you pass
away, and then all of a sudden,millions of dollars come, you
know, into being that weren'tthere before, and that pays off
any outstanding loan. Does that
Ad Read (20:09):
make sense?
Chris Picciurro (20:10):
Yeah. From a tax perspective, I want people
to think about that, one, worstcase scenario, you pass away.
Your your family ends up with acouple million dollars or more,
you know, depending on yoursituation. Yep. Unless it's a
unless we're talking you know,unless you have a taxable state,
which is pretty rare, that's alltax free money, by the way.
That's all tax free.
Tom Laune (20:31):
Yes.
Chris Picciurro (20:32):
The and and I want you just if you're
listening, thinking about if youyou know, we we talk about
HELOC. Right? And the HELOC andand but, you know, if if the
mortgage if the value of yourhome decreases, your loan to
value could decrease. With withlife insurance, you basically go
through underwriting one time.It doesn't matter what happens
to you after that, and it can'tthey can't come back and say,
(20:54):
you know what?
No. You're not as healthy as youused to be. You don't make as
much money as you used to make,so we're gonna decrease your
value. So, again, kinda the consof the the concept is your take
your take becoming your ownbank, and, you know, and this
works really well, you know, forfor a lot of people, but
especially, like, real estateinvestors and entrepreneurs.
I've been in business twenty twoand a half years, and and every
time I go and get a mortgage,I've never really had a problem
(21:17):
with it, but there's a lot ofanxiety.
Right? Because there's just asyou know, Tom, there's a lot
more red tape we have to gothrough as entrepreneurs. So you
mentioned that so I wanna touchon something that that cash
accumulates in this lifeinsurance policy, and and people
are paid dividends. Is it my myunderstanding that those
dividends are tax free as longwhile they stay in the policy?
Tom Laune (21:40):
Yeah. The the internal buildup or the cash
accumulation in the policy istax advantaged. And and the why
I say advantaged and not free isbecause eventually, Chris, in
all of these policies, there'sgoing to be a a greater amount
of capital or cash inside thepolicy than your basis. And then
(22:02):
your basis is just how muchmoney you put into it. Right?
So if you surrendered it and youhad a million dollars of basis
and $2,000,000 of cash value,then there would be a capital
gain of a million dollars. But Iget around that completely
because this also provides a taxfree retirement income stream.
(22:24):
And so in retirement, the way itworks from a taxation
perspective is that lifeinsurance is based on first in,
first out taxation. So we canwithdraw the basis or the money
we put into that in premiumdollars out first in retirement.
And then once we have no moneyin it anymore from a basis
(22:44):
perspective and it's all capitalgains, then we take loans
against it for the rest ofretirement, and it builds up
this enormous loan balance,usually in the millions of
dollars.
And then rather than paying thatloan off, eventually, people
pass away, and the lifeinsurance pays off the loan tax
(23:04):
free, and the balance of theloan goes to the beneficiary.
Wow. So that's how it's provideda tax free retirement income and
a tax advantaged accumulation.
Chris Picciurro (23:16):
And no. That's very important. And then let's
talk about the loan part for aminute. You know? Yeah.
Let's assume you've accumulateda cash value, and you Yep. You
take a distribution as a loan.Now that's not a taxable event.
You do pay a 5.3% interest,which is less than most mortgage
HELOCs and and that sort ofstuff. But when you pay your
(23:36):
when you pay that line loanback, you're paying yourself
interest, I believe.
Are you you're you're paying thefive
Tom Laune (23:44):
point So I'll explain this how it works. This is a
little bit complicated and oneof the things that people get
confused about about this. Sothe interest is paid to the
insurance company. The insurancecompany takes that, and that is
profit to them, and they returntheir profit back to you in the
form of a dividend. So it's notone to one, though.
(24:06):
It's not I paid 5,000 of dollarsof interest, and now I get a
$5,000 dividend. It doesn't worklike that. It's I pay $5,000 of
interest that goes into thegeneral account. They look at
their mortality and expensecharges, and then they determine
how much dividend they're gonnapay, and they return it back to
the policyholder. So it's verymuch you're not paying interest
(24:29):
to yourself.
Okay? That's one of the thingsthat people get confused about
with this. You're payinginterest to the insurance
company, but you are stillgetting a dividend even when you
have a loan outstanding. Andkind of to to bring this back to
the HELOC analogy, your house,if you had a HELOC of $200,000
(24:51):
and a $500,000 house, and youtook that $200,000 and went and
bought a rental property withit, and then your house went up
in value, you're still gettingthe appreciation on the house.
Right?
And you have the rentalproperty. But with a house, as
we saw from 02/1989, they can godown in value too, believe it or
(25:12):
not. Right? Most people nowdon't think that's possible, but
we all know that houses are notguaranteed to go up in value.
But with life insurance, likeyou said, Chris, it is
guaranteed to go up in value.
It never can go down, whichmeans it's more stable
collateral with less risk, andthat's why they can charge a
lower interest rate. You'renever gonna get backwards on it.
Chris Picciurro (25:37):
And what are you finding your your clients
are utilizing? You know, I mean,you don't have to take the loan.
Right? You could just let it sitin there and get paid tax free
dividends, which I I know youcan't say what the dividend
amount is because it it just itfluctuates. I will say mine's,
you know, at about six, six anda half percent because I'll
speak personally.
(25:57):
Yeah. You the money could justsit in there dividend. But for
the people that take advantageof the loan provision, which is
a which is not consideredtaxable income, what are what
are your what are your clientstypically using those proceeds
for in general?
Tom Laune (26:15):
That's a great question. So either they use it
for some okay. I'll just giveyou a broad category. Something
they can control. Okay?
So I personally don't recommendtaking loans from your life
insurance policy and, forexample, buying stocks that you
have no idea if they're gonnacrash tomorrow or not. Right?
(26:37):
It's there's too much riskinvolved in that. But if you
have a small business that youknow you have a product you can
mark up and you need to buyinventory with it, or I have
just a wide variety of thingswhere you are in somewhat
control over it, or even if youwere gonna go buy a rental house
where you knew the the area andyou felt really good about the
(27:00):
the loan to value and how muchyou were gonna get a good deal
for, and you could fix it up,and you might be buying a
distressed asset. Those thingsyou are in more control over,
and that is what most of myclients use their policies for.
It's just something they have adegree of control over, and and
it's not wild speculation. Anddefinitely not it's not a great
(27:25):
idea to take loans fordepreciating assets. Like, for
example, I'm gonna take a$40,000 loan. I'm gonna take my
whole family and extended familyto Hawaii for two weeks. Because
at the at the end of that time,you got nothing.
You had the fun, but now you owethe 40,000 back. So, Chris, let
(27:45):
me touch on this real quick.There's a concept called
interest rate arbitrage, andwhat that means is that you're
trying to get in your investmentthat you take a loan from your
policy for a higher return thanyou're paying in interest. So if
you could get a 10.6% return andyou were paying the insurance
(28:06):
company 5.3%, your actualeffective rate of return on that
deal is a % because you're doingwhat's called interest rate
arbitrage. And I'm not gonna goway into the weeds on this, but
people generally miss thispoint.
Right? This is how banks makemoney. Banks do not make money
(28:28):
by earning a quarter of apercent. Okay? That's what
people think.
Oh, I I'm you know, they'repaying me 5%, and I'm loaning
money at five and a quarterpercent. I must be they must be
only making a quarter percent.No. They're making the spread
because they're not lending outtheir own money. They're lending
out their depositors' money.
(28:49):
Okay? Banks, in fact, buy a tonof whole life insurance, and
they utilize whole lifeinsurance as one of their key
assets. It's called BOLI or bankowned life insurance. So I teach
people about how they canutilize interest rate arbitrage
to radically increase theirreturns. Does that make sense?
(29:10):
Absolutely.
Chris Picciurro (29:12):
And to kind of, you know, wrap that up and just
say, I'm sure if you'relistening to this still, which
you should be. And if you're notlistening to it, you didn't make
hear me say that you should be.But, you know, when at what
point when when are the topthree or four times that someone
listening to this should was ita good idea to really look at
(29:37):
this concept and and considerit?
Tom Laune (29:39):
That is an awesome question. So number one, this is
something you have to be awareof, is that you have to have a
reasonable you don't have to bein perfect health, Chris, but
you have to be in reasonablehealth for this to make sense.
Right? You know, you can't havejust had a major health incident
like cancer or something likethat in the last couple of
years. So you were very smart towhile you knew you were in good
(30:04):
health prepping for thatmarathon to go ahead and get
underwritten.
It was great. Right now, we'reseeing a lot of clients because
of the new technologies outthere. They're able to do
electronic underwriting, and youdon't even have to have a
medical exam. And that could goup to $7,500,000 of life
insurance with no medical exam.In fact, that just happened last
(30:25):
week.
I had a husband and a wife bothget $7,500,000, no medical exam.
So it does happen, and it'sreally cool. So you may not even
have to have that. So you wannahave reasonable health, number
one. And number two, you have tobe somewhat entrepreneurially
minded.
Meaning, like, you can do thisand just let the money
(30:47):
accumulate the cash accumulatein a policy and never do
anything with it. But if youwanna maximize this strategy,
you really wanna have some sortof either small business or
entrepreneurial in theinclination that would allow you
to want to to leverage it forsomething that you want to have
happen in your life from aninvestment perspective. Like, I
(31:10):
don't use the I word ofinvestment because nothing I do
carries a lot of risk with it atall. It's very, very, very, very
low risk. I think it's evenlower risk than putting money in
a bank.
But when you take a loan,whatever you put that money into
is the investment. Right? It'seither a small business or real
estate or some you know, one ofthe things my clients do a lot
(31:34):
is they do private lending. Soif they can lend their money
out, and I've done this in thepast too, at 15% return and pay
5.3%, then you're gettingalmost, you know, 200% rate of
return on your money. So it's avery good thing for that.
So just to wrap this up, there'sthree things that this thing
(31:55):
accomplishes. It guarantees cashvalue growth. It serves as
collateral for otherinvestments, and it gives you a
legacy for your family tax free.So it accomplishes three things
at once, and that's anincredibly powerful use of, you
know, putting your dollars towork at more than one place at a
(32:18):
time.
Chris Picciurro (32:18):
Absolutely. And and, you know, you you know, so
so and if someone's has meetsthose criteria and you're
sitting, you know, have moneymaybe in a bank savings account,
money market earning a verysmall amount of interest also,
by the way, that's fully taxableversus you know, you might as
well be tax efficient. So Yep.Man, I really appreciate it, and
(32:41):
I I've learned a lot even thoughI've been doing this.
Tom Laune (32:44):
That's great.
Chris Picciurro (32:44):
Chris, I've
John Tripolsky (32:45):
been sitting here basically in silence the
whole time that Tom, youexplained that really, really
well and kinda you know, youmentioned the three things, so I
kinda think of it, you know, asthe trifecta. Yes. Which is
basically the you know, I lovethat term trifecta because it's
like three wins right on thescoreboard all in one time.
Chris Picciurro (33:01):
But Mhmm.
John Tripolsky (33:01):
The way you describe that, but then also
just the process on how it allworks. You did a great job
explaining that. Because, Chris,you know, to your your question
you had asked, I honestlythought that was the case. Like,
you're paying yourself interest.But then the more you think
about it, you're like, well, howwould that even work?
Like, how do how do how doesthis even exist? Right? You're
you're not adding any fuel tothe the operational tank, if you
(33:23):
will, for somebody to managethis thing because they're not
making any money.
Chris Picciurro (33:26):
Right.
John Tripolsky (33:26):
You do a great job. And, yeah, if if anybody's
interested in this, I mean,we'll make it pretty easy for
you. We'll actually drop a, alink right in the show notes,
and you can go directly to theteaching tax flow hub. So what
that is is you'll see it whenyou go on it. It'll have a a
list of things you may beinterested in.
Click on them, and we're happyto make introductions for you.
So it saves you the the troubleof having to trust, the Google,
(33:50):
as my grandmother would havesaid. You don't have to go on
search for it. We we actuallyhave somebody like Tom. I know I
know you're part of thatecosystem with us there, and,
yeah, we make it pretty easy.
So anybody that's in theaudience listening or watching
this will, again, put that linkin these show notes to the
Teaching Tax Flow hub, and checkit out. Let us know what you
think, and let us know what wecan do to to help you. And, you
know, Tom, we'll have to haveyou back on again here after a
(34:13):
while and kinda maybe do a do atwo point o, a recap, or dive a
little deeper into some of theseconcepts as well. Absolutely.
And we'll let Chris come backtoo, I guess.
Chris Picciurro (34:25):
So Thank you.
John Tripolsky (34:28):
Yes. I'm coughing over here. It's it's
like my joke. I make myselflaugh. But, yeah, everybody
definitely check out theteaching tax flow hub, and we'll
see everybody back here again onthe podcast next week.
Different time roughly,completely different topic. Have
a great week, everybody.
Disclaimer (34:45):
The content provided is for educational only. We
encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(35:06):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
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