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Below are Frequently Asked Questions and a further explanation of many concepts of the Infinite Banking System utilizing whole life insurance. Please read our questions below and contact us for any other questions or to move ahead with an account.
- What is the Infinite Banking Concept and how does it work?
- Why not use my savings account, money market, mutual funds, IRA or other retirement account for banking purposes?
- How do I begin setting up a Personal Banking System?
- Is there an application fee for the whole life insurance policy?
- How much capital do I need to contribute before I use my bank?
- Is it possible to start using my infinite banking assets prior to full capitalization?
- How do I access the money inside my Personal Bank?
- Are there any limitations on what I can use the money for?
- What is a Bank Management Account?
- For my Infinite Banking account, Can I borrow more than the current cash value?
- Is there a down payment required for withdrawing money from my Infinite Banking Account?
- How safe is my money in a whole life insurance policy?
- When will my first monthly loan payment be due?
- Can I get a second or third loan before I pay off my first loan?
- If I choose to sell my car to another individual, can my loan be assumed, or taken over, by that person?
- What is the largest loan amount I can get from my whole life insurance policy?
- Why would I want to pay interest on money I am, essentially, loaning to myself from the whole life insurance policy?
- If I make a large lump payment on my loan, can I have my loan payment schedule adjusted (re-amortized), so that I have a lower monthly payment amount?
- Are there any penalties for prepaying my loan?
- Can I finance the purchase of a car that will be used for business purposes?
- Are there other things I can do with my Personal Bank?
- Can I rollover funds from other accounts like an IRA or a 401k to begin capitalizing?
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What is the Infinite Banking Concept and how does it work?
Before we can discuss the Infinite Banking Concept, it’s first important that you have an understanding of banking. Banking is a process that involves a saver, a banker, and a borrower. In most cases, we are the saver and the borrower. We put money in the bank and borrow it back out. The banker is the intermediary who holds and uses the saver’s money in exchange for a given rate of return.
Many people agree that they would like to have their own bank but few are willing and able to go through the arduous, lengthy and expensive process of establishing their own federally chartered brick and mortar bank. That’s where the Infinite Banking Concept can help.
Where can you find a vehicle that eliminates wealth transfers by allowing you free access and use of your money without the burden of taxes, penalties or market risk? Where can you find a vehicle that allows your money to grow tax-deferred, with the possibility of being withdrawn tax-free, provides guaranteed rates of return, tax-free dividends, a level of asset protection, virtually unlimited contributions… and the cherry on top… a death benefit that will pass income-tax free to your heirs?
The answer is a dividend paying whole-life insurance. It’s true! Whole life insurance can do all of this and more. Contrary to conventional wisdom, we focus on the living benefits of these policies (not the death benefit, which is just a bonus). You might be asking yourself how a discussion of banking has led us to whole life insurance. Well, the fact is that there are no other financial vehicles that offer the same number of benefits while giving us the features we need to become our own bankers.
A whole life insurance policy allows a policyholder to take policy loans from the cash values within the policy. The policyholder maintains full control of these funds and dictates the re-payment terms of the loan. This means that you, the policyholder, determine the interest rate, the amortization period and other loan terms. As your own banker, you now control the finance function for your life, family and personal business. Think about all the items that you finance directly or indirectly. The ways that you can put your bank to work are virtually infinite.
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Why not use my savings account, money market, mutual funds, IRA or other retirement account for banking purposes?
Banking can be done with any of the financial vehicles above. After all, we’re simply borrowing from ourselves and paying ourselves back. In this case you have to look through the shell to get the nut, we have analyzed each financial vehicle and weighed the pros and cons of each.
Deposit accounts like savings and money market accounts are tax nightmares. You deposit post-tax dollars and the growth within your account gets taxed every year. Rates of return are historically some of the lowest offered so it’s very hard for your money to go to work for you. Your money is safe and liquid but does not grow tax-deferred like a whole-life insurance policy and cannot come out tax-free like a whole life insurance policy. In addition, you do not get the income tax-free life insurance that will protect your family and heirs upon your death.
Mutual funds can get a nice external rate of return but all growth is subject to capital gains tax. This means that your effective rate of return is much lower. However, the money within a mutual fund is at risk based on the markets and companies that you are invested with and your funds are not guaranteed to grow. Selling and buying mutual funds costs money and can trigger short-term capital gains taxes. Depending on the state of the economy it may not be wise or advantageous to access your funds. Liquidity then becomes a problem, which is vital for fulfilling a banking role.
With a whole-life insurance policy there are no transaction fees and your funds are guaranteed to grow on a tax-deferred basis. The life insurance companies invest in very safe financial instruments like bonds which equals lower risk for the policyholder. When it does come time to access your cash values, they can come out tax-free. And once again, mutual funds do not offer the income tax-free life insurance that will protect your family and heirs upon your death.
IRA’s can be very beneficial, but IRA’s are meant for retirement and only retirement. There are specific rules that surround IRA’s and if you break those rules then you don’t get the tax benefits that they offer. For instance, there are adjusted gross income rules and limits on the amounts you can deposit each year. If you need to access your IRA funds before you hit the current retirement age, you will be assessed a 10% penalty fee plus you will taxed at your ordinary income tax rate.
Many people like self-directed IRA’s and use them for managing their investments. This brings up an issue called self-dealing. The owner of an IRA account is not allowed to handle the IRA funds or directly benefit from or be involved in any of the investments that are made within the IRA. If your IRA buys a home, you can’t rent it to your sister and you can’t fix the plumbing. Any involvement in that investment and it can destroy the IRA tax benefits. Therefore, in order to self-direct your IRA you will need a custodian to handle those transactions. These custodians charge annual fees and/or transaction fees that can erode the gains on your investments. So, we do not find IRA’s to be a satisfactory vehicle for banking.
Many people like the tax benefits offered, but let’s be clear that these plans are designed for one purpose alone and that’s retirement. Whole life insurance policies can be used for anything. They are extremely flexible and the ways we can use them are infinite! Self-dealing is the purpose of the Infinite Banking Concept. We want to enhance our retirement, our savings our insurance protection by utilizing our cash values for every day financing purposes. We want to finance and use our own cars, homes and business equipment. We want full access, use and control of these funds at any time without triggering transaction fees or 10% penalties. We want to be able to deposit as much money as possible without limits and with no adjusted gross income limits. With whole life insurance, high income earners can get the same tax benefits plus much more. They are not shut out from growing their assets tax-deferred and being able to withdraw them tax-free just because they are solid income earners.
So, by looking through the shell we can see that when it comes to banking, a whole life insurance policy is far superior to any other vehicle available today. It meets the banking functions while providing additional benefits that are second to none. For maximum financial efficiency, the whole life insurance policy utilizing the Infinite Banking Concept is the best choice.
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How do I begin setting up a Personal Banking System?
The first step is the application and underwriting process. Since the best banking vehicle available is a whole life insurance policy, your life and health are factors for getting a policy established.
The second step is the capitalization phase. Before you can begin taking loans from your policy you will need to make a series of deposits in order to build the available cash values. This can be broken into monthly, quarterly or annual deposits. Once your policy has built up cash values to begin serving your financing needs, it’s time to get started using it. You can get this process started by contacting us today.
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Is there an application fee for the whole life insurance policy?
There are no application fees. All up-front application expenses are paid for by the insurance company. You simply have to fill out an application and take an in-home medical exam. There’s no stress and no obligation.
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How much capital do I need to contribute before I use my bank?
There is not a minimum amount that you must contribute before you can put your bank to use. If you have financing needs and sufficient cash value within the policy then you can take a policy loan. It’s very important that you are a good banker and pay yourself back because, just like any business, it is critical that the bank be properly funded. Without sufficient capital, few businesses can survive.
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Is it possible to start using my infinite banking assets prior to full capitalization?
Yes. If you are a banker of integrity, discipline and honesty, you can begin using your policy cash values almost immediately while you still continue to complete the capitalization phase. However, if you cheat yourself by trying to short circuit the capitalization phase, you will lessen the efficiency and power of your bank. Keep paying the policy premiums as designed, while re-paying any outstanding loans.
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How do I access the money inside my Personal Bank?
The banker (you) owns the policy/bank and therefore has access to the cash value inside the whole life policy at any time, for any reason. You are in first position to access the cash value for any purpose if you desire.
Accessing the money inside your Personal Bank is as simple as picking up the phone and letting the customer service representative know how much you need. You cannot borrow more than the current cash value in your bank. In the case of a large loan a written request for the loan must be submitted to the insurance company.
As a practical matter the whole life insurance policy owner should decide if he wants to withdraw from his policy or borrow from it. Withdrawing from the policy does NOT allow you to repay the policy so withdrawing from the policy should generally be reserved for events much later in life when you are certain that you do not want to repay the policy. In addition, withdrawing funds may trigger a taxable event so it’s best to consult with us about your plans and needs for financing.
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Are there any limitations on what I can use the money for?
No. Unlike a self-directed IRA, the insurance company will not ask any questions about how you intend to use the funds. They will also not require you to know how or if you intend to pay the funds back. While commercial lenders may place restrictions on what they will and will not finance YOU, the banker, can decide on a case by case basis what is in YOUR best interest to finance. YOU decide how much risk you are willing to take. Clearly this puts you in a position of control and responsibility. Discipline is required!
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What is a Bank Management Account?
The owner of the whole life insurance policy is the only one the insurance company can write a check to. Therefore, the proceeds from an insurance policy loan must be sent to the policy owner who will then deposit the proceeds of the check into his Bank Management Account. The Bank Management Account will be at your local federally chartered bank. This account should never hold funds of any significant amount.
In other words this account is a ‘put-and-take-account’ to transport money to and from the policy holder. It provides an audit trail for tax purposes and helps the policy holder/infinite banker become vividly aware of the value of what he is doing financially and tax-wise. This account is for the sole and separate use of banking funds. Other funds not derived from your Personal Bank should not be commingled with the funds in your Bank Management Account.
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For my Infinite Banking account, Can I borrow more than the current cash value?
No, you are not the Federal Reserve and you cannot do fractional lending. In most cases you can borrow up to 92% of your cash values within the policy. To find out the exact amount that is available you can call our company and have us run an in-force illustration or you can call the customer service agents at the whole life insurance company. Either will be able to tell you the funds that are available for borrowing.
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Is there a down payment required for withdrawing money from my Infinite Banking Account?
No, the insurance company does not require a down payment for withdrawing money. Also, unlike custodial accounts for self-directed IRA’s, the insurance companies do not have any transaction fees. There are no charges whatsoever for taking money out, making premium deposits or repaying an outstanding loan.
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How safe is my money in a whole life insurance policy?
Historically, insurance companies have been one of the safest places for your money. Most have very strong investment backgrounds and are quite financially stable. Care should always be exercised in selecting a whole life insurance company that is well-managed with a proven financial track record.
At Vantage Point Financial and Insurance Group, LLC, we work with only a few insurance companies that have excellent records of performance and thoroughly promote the infinite banking concept. Unlike other businesses, life insurance companies are not allowed to file for formal bankruptcy. However, in the unlikely event that a company is unable to meet its obligations most states have established Life and Health Guaranty Associations.
Life insurance companies in these states support one another and, therefore, if one fails, the others will be assessed the money to pay the claims of the insured persons who held policies with the former provider. There are limitations to the coverage and you should check into these limitations with your state’s particular guaranty association. In addition, most insurance companies are insured themselves for major losses. This is called re-insurance and provides an additional layer of protection. If you have any questions about this or need further explanation, please feel free to contact us.
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When will my first monthly loan payment be due?
The short answer is that you don’t have monthly payments, if you don't want to. The insurance company will calculate the interest they are going to charge you on a contract year basis, rather than a calendar year. They will then add this amount to your loan up front. Should you repay that interest before the loan is re-paid, the interest will be pro-rated.
Your local bank will expect principal and interest payments to begin 30 days after the loan is funded. However, as an infinite banker, you did not borrow from the local bank. YOU ARE THE BANKER! You can decide when the payments are due, how often they are due, the amount, and the interest rate. All the terms are entirely up to YOU. The only thing the life insurance company will require is annual interest which it charges up front. YOU, however, as the BANKER, can decide when you want to make that interest payment. While you do have extreme flexibility, it is highly recommended you give yourself the same kind of structure the corner bank would. Be an HONEST BANKER from the beginning. We can teach you how.
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Can I get a second or third loan before I pay off my first loan?
Absolutely! As discussed in the introduction, the power of infinite banking is found in turning the money over as quickly as possible. We highly recommend you make additional loans from your bank as soon as the first payment or two comes back to it. The bank is most-efficient when the funds are utilized, not accumulated. Money makes more money as it is being used, which is known as the velocitization of money principle.
When your local federally chartered bank receives monthly loan payments, they instantly look to “turn” that money over again by making another loan. By using the same money and earning interest on multiple loans, instead of just the original loan, they are able to increase their rate of return. As your policy and banking activities grow, so too will your streams of income from loan repayments. We encourage you to “turn” your money whenever it is prudent to do so.
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If I choose to sell my car to another individual, can my loan be assumed, or taken over, by that person?
Certainly, You Are The Banker and you decide if you want to make it assumable by another party. If you would like that stream of income to continue, then you can make it assumable. If you want to retire the loan then you would request payment in full.
Once again, you have full control of the loan terms and full use and control of your policy’s cash values. Only you know the needs of your personal banking system and the great news is that you decide. When was the last time you had a traditional loan? With a traditional loan you had no control over these decisions and you received very little benefits. Now, with the Infinite Banking System, you regain control and benefit financially!
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What is the largest loan amount I can get from my whole life insurance policy?
Since you are the banker, you have complete control and you can decide to take as big a loan as is possible with your current cash value. You can only borrow as much as you have in your cash value (minus the prepaid interest the insurer will charge you up front). The insurance company can tell you over the phone your maximum available loan amount or, should you prefer to contact us directly, we will be able to print out an in-force illustration. This illustration is a policy statement that provides the most current financial status of your policy.
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Why would I want to pay interest on money I am, essentially, loaning to myself from the whole life insurance policy?
If you are willing to repay your whole life insurance policy with interest you will soon learn that you will be able to continue to build cash value inside a tax-deferred account as if the money had never left the control of the insurance company. Ask yourself this question: How much money do I want in a tax-deferred account that can be accessed at retirement in an income-tax-free manner? You probably would want to get as much money into that account as possible!
In addition, you will be growing other features as well. Your tax-free dividend will swell as your policy grows. The income tax-free death benefit that will pass to your heirs upon your death will also expand. It’s not only the cash values that will increase when you pay yourself back with interest; it’s the entire policy that benefits. Plus, you will have a larger pool of funds to borrow against for future financing needs, which to the Infinite Banker is one of the most important features.
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If I make a large lump payment on my loan, can I have my loan payment schedule adjusted (re-amortized), so that I have a lower monthly payment amount?
That’s up to you, the banker. You can re-amortize your loan at any time at no additional charge. You can also pay-off your loan in full or make a partial lump sum payment and re-amortize the loan. You have full control and you make the decisions. This takes discipline and responsibility, however, the financial benefits of being an honest banker and treating your personal banking loans like they were traditional loans are numerous.
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Are there any penalties for prepaying my loan?
You may pay off either a portion of your loan or the entire amount at any time without incurring any penalties. Remember, the whole life insurance company does not assess transaction fees for policy loans, withdrawals or deposits. It is always wise to review your specific case with our company or your CPA. In some instances there are specific IRS requirements that we must meet in order to maintain the tax benefits that we seek, like interest deductions for business loans.
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Can I finance the purchase of a car that will be used for business purposes?
Absolutely! Just think of the tax advantages that borrowing for business through your Infinite Bank affords you! The IRS clearly allows the interest paid in relation to a legitimate business loan to be deducted from the businesses taxable income. By establishing a Personal Banking System and loaning the funds to your business you are able to receive interest income while your business deducts the interest expense.
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Are there other things I can do with my Personal Bank?
You bet! That’s why it’s called the Infinite Banking Concept. The choices and options are truly infinite. Think about your personal needs, your family’s needs and your business needs. Are they not infinite? Welcome to the world of the Infinite Banker! Remember, we finance EVERYTHING we buy, regardless of whether we pay cash and give up our principal and interest or whether we borrow from an outside source that consumes both principal and interest. You now have the ability to recapture everything you are financing today. Think about the possibilities!
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Can I rollover funds from other accounts like an IRA or a 401k to begin capitalizing?
Yes, you can, and in some cases that rollover may be tax-free, depending on the type of account.
Contact us to discuss how Private Banking with the Infinite Banking System will work for you as an individual, your family, and business. We will contact you to schedule a time to plan and prepare a customized analysis.
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