I am in a bit of a pickle.....can anyone offer me some help/advice to get back on the horse?

[DHK]

That's what the overloan protection riders are for.

 

[Allen Trent]

That's what the overloan protection riders are for.

agree, if they are on the policy & if they are held up by the IRS in the future as valid.

But overloan protection doesnt do any good when a policy is surrendered or is 1035 exchanged by an ignorant new agent that doesnt realize a loan is extinguished at time of 1035 & taxable gain of the outstanding loan is reported to taxpayer.

Again, when executed & managed properly, it is awesome, but when consumers are left to self service something they didnt fully understand & definitely dont in their elevated old age, it can be disastrous. I wish carriers had a suitability department looking at surrenders with loans on anyone over age 65 or 70 to make sure the consumer knows the tax bill coming. They shouldnt have to find out after it is too late when filing tax returns.

 

[DayTimer]

Don't understand the advantage of this if the only objective is to get out of debt. Why not jus take the "found" money and pay it directly on the debt?

You don't see the advantage of paying the found money to yourself first, and then using it to pay a creditor and paying yourself back instead, with substantial savings in interest, all the while growing an asset, i.e., equity in a whole life insurance policy which will have significant available cash equity as you retire your debt? A life insurance policy that will complete your project and leave an estate behind for your family if you should pass before the debts are all fully paid, I would add.

Compare that to your way, where you will maximize your interest expense, and when you are done retiring your debts, you have nothing but debt-free balance sheet but no corresponding asset to show for all that income you sent to the banks, auto lenders, student loan processors, mortgage companies, etc.

 

[Tahoe Ray]

I believe (and this isn't in the tax code... yet) that Roth distributions will be a factor in Social Security provisional income calculation just like tax-free municipal bond interest is also factored in.

I see so many people try to make this point but the ideal client for fully funded life isn't relying on anything from social security.

It will be nothing but a bonus.

The government can easily make life insurance loans fall under the same calculation.

 

[DHK]

I see so many people try to make this point but the ideal client for fully funded life isn't relying on anything from social security.

It will be nothing but a bonus.

The government can easily make life insurance loans fall under the same calculation.

Let's look at past precedent: All the contracts issued before 1986 (whatever date that was) was grandfathered in the tax laws at the time they were issued.

And life insurance loans are not taxable as income. Loans from MEC contracts have their earnings taxable, but otherwise they are borrowed against the principal.

Loans are loans and are a transfer of capital, NOT a realization of income just like for all other forms of borrowing. (See United States General Accounting Office report for January 1990 page 27.)

Contracts are not like accounts. That's why life insurance is superior to the Roth. Roth is an account. Life insurance is a contract. And changing the contract... will require a 2/3rds vote of congress (and a failure of our advocacy associations like NAIFA and Finseca).

Very different rules and laws at play here.

 

[Tahoe Ray]

Let's look at past precedent: All the contracts issued before 1986 (whatever date that was) was grandfathered in the tax laws at the time they were issued.

And life insurance loans are not taxable as income. Loans from MEC contracts have their earnings taxable, but otherwise they are borrowed against the principal.

Loans are loans and are a transfer of capital, NOT a realization of income just like for all other forms of borrowing. (See United States General Accounting Office report for January 1990 page 27.)

Contracts are not like accounts. That's why life insurance is superior to the Roth. Roth is an account. Life insurance is a contract. And changing the contract... will require a 2/3rds vote of congress (and a failure of our advocacy associations like NAIFA and Finseca).

Very different rules and laws at play here.

Just like illustrations, we can each have our crystal ball and neither will be correct.

But, mine is right an yours is wrong lol.

 

[DHK]

And that's my opinion... And it should be yours!

 

[cpn4388]

I say it again down below, but I do this - it is one of my main strategies. It works best with clients with many debts, and not nearly as well if all they have is a mortgage (for those people, the product is still great, but the sales concept will be infinite banking & tax-free retirement, or perhaps real estate investing) And it typically shakes out to a nine to eleven year average to get everything paid off. I have seen a few in the 7 year time frame but that requires a certain alignment of the stars, e.g. they have two $600/month car notes and both have less than 24 months to maturity. Read on to understand why that would matter ...

So the steps are:

1) Find the money to fund a ar whole life policy, funded to the max: This is usually by diverting money from 401(k), IRA, cutting out the country club and golfing at the public muni, etc For example, clientis saving 6% into 401(k) with a 3% employer match. Let's continue funding the 401(k) to the 3% match and use the other 3% to help fund the policy. Client now has a much larger par whole life than they could have "afforded" and you have not asked them to "spend" anymore out of pocket than they were already doing.

2) As premiums are paid, use accumulated cash values to pay off debts

3) As debts are retired, divert those payments into the policy to pay off policy loans

4) When cash value = mortgage balance, policy loan pays off mortgage.

Now free cash flow goes into paying policy loans and continuing premiums.

This does work, it is a more efficient use of cash to accomplish what many would recognize as the Dave Ramsey "debt snowball." It is a way to become debt free far more quickly than doing it the Dave Ramsey way while still being able to take your family out to Outback for dinner once in a while and maybe even take a vacation without having to run it through on your Visa card.

The irony is it does not work as well if the only debt the client has is the mortgage. Works incredibly well if they have some revolving charge, maybe a car note or two, some furniture on a note, etc. A $500 premium can rapidly become $2500/month (or more) in cash flow diverted into the policy. Imagine someone can pay $500/month in premium, and their current debt service (mortgage, cars, furniture, credit cards) is $3500/month. Now, some of you well-heeled insurance agents may scoff, but I have found that to be very common. Americans are LOADED down with debt.

Now, use the rapidly accumulating cash values to pay off the smallest debt first. Once that debt is paid off (let's say the monthly payment was $125) now we add that $125 to the $50 premium payment. new cash values accumullate from the new premium payments and the policy loan is repaid out of the $125 that is now freed up from the credit card debt. Son enough the cash value will be built/replenished sufficiently to pay off the car note, freeing up another $489/month. Now the client is making monthly payments into the policy of $1114/month ($500 premium + $125 free cash flow from CC elimination and $489 from car note elimination). Continue the process until the client is debt free.

In my experience, seven years is unlikely. It more typically will take 9 to 11 years. But it still saves the client a yacht-full of interest payments, builds up a supplemental retirment savings faster than they would ever have thought possible, and they got all the insurance protection (most) already wanted for their family but thought they couldn't afford.

And all with the guarantees of a par whole life rather than the ambiguities and uncertainties of an IUL. And if done ethically, you do it using the guaranteed values not the non guaranteed.

Using the guaranteed values to illustrate the plan does two things

1) it guarantees the client of a certain result at a certain time if the client follows the plan, thus protecting you, the agent, should the mutual company decide to do an ON on you and your book of business, and

2) Makes you look like a hero when the cash value is sufficient in 8 months to pay off the first debt when the client thought it would take 12 months because the current

You can play with the numbers by exporting the illustrated values into excel, and it works best if you are able to run it monthly rather than annually for max efficiency.

Sounds too good to be true, but it works incredibly well when designed properly and the client buys in (COMMITS) to the program. And the irony is that the more debt your client has the better this actually works (assuming you can find the money needed for the premium to get the whole thing started. People do not like another bill. But if you can show them how they can find money they are already spending elsewhere and divert that nto a policy without diminishing their current lifestyle (public course are great) then it becomes a real win for the client.

I have not read this whole thread and I am responding only because @scagnt83 is here and he's a good dude whose posts have helped me a ton. I make no judgement on whatever it is the OP is claiming to be doing.

What company do you do this with?

 

[Live and Learn]

What company do you do this with?

YFB “Your Family Bank” is one of the major companies that offers the software and the training. If I remember correctly a handful of different carriers can be used for the whole life product. Foresters is one of them, I can’t remember the others. There are a couple of guys in my hierarchy that do multiple of these plans a month.

 

[scagnt83]

That's what the overloan protection riders are for.

Yet to be validated by the IRS or courts.