Is Cash Value Life Insurance a Viable Asset?

In this episode, we reframe life insurance from a death-only benefit to a living asset guided by IRS Section 7702, showing how liquidity, stability, and tax treatment can expand your options. Real stories, bank data, and simple design rules lay the groundwork for part two on implementation.

• differences between term and cash value
• why liquidity beats forced selling
• how Section 7702 enables tax-advantaged funding
• banks’ use of BOLI and corporate COLI
• Rockefeller legacy and Disney financing examples
• compounding without interruption via policy loans
• positioning as a bond alternative
• building an opportunity bucket early
• preview of design principles for part two

Please like, follow, subscribe, and tune back in next time, Huddlers!

EPISODE SOURCES:

U.S. Banks and BOLI:

Clarifications: Considering the entire banking industry, 69% own BOLI. Over 80% of banks classified at over $2 Billion in holdings own BOLI - as of the latest report in 2024.

Evolving Trends in Bank-Owned Life Insurance (2024 Report): https://mbschoen.com/wp-content/uploads/2025/10/BOLI-Industry-Developments-2024-Q1.pdf

Total BOLI Held by U.S. Banks (Cash Surrender Value) (As of September 30, 2024): https://themoneyadvantage.com/bank-owned-life-insurance/#:~:text=Industry-wide%20totals:,and%20$10%20billion%20own%20BOLI  
 
BOLI Held by Individual Banks: https://www.usbanklocations.com/bank-rank/life-insurance-assets.html

Interagency Statement on the Purchase and Risk Management of Life Insurance: https://www.fdic.gov/news/financial-institution-letters/2004/fil12704risk.html

Dave Ramsey on Whole Life Insurance: https://finance.yahoo.com/news/payday-lender-middle-class-dave-000142858.html

Suze Orman on Life Insurance: https://www.facebook.com/suzeorman/posts/if-there-is-anyone-in-your-life-who-depends-on-your-income-you-need-life-insuran/1194269845388015/

History of Life Insurance: https://www.selectquote.com/life-insurance/articles/when-was-life-insurance-invented

The Rockefeller's Use of Life Insurance:
https://billmyway.com/how-did-the-rockefellers-use-whole-life-insurance/
https://www.symphona.us/estate-planning-insights-from-americas-wealthiest-families/

Walt Disney's Use of Life Insurance: https://www.commercebank.com/personal/ideas-and-tips/2021/the-story-of-the-loan-that-helped-build-disneyland

---------------------------------------------------------------------- 

Disclosure: Information contained in this podcast is for entertainment and informational purposes only, and should not be considered as financial advice. Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser.  Registration as an investment adviser does not imply a certain level of skill or training. Keystone Financial Group and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice. 

Transcript

Warm-Up And Topic Reveal

Ryan Fleming 0:00

The financial huddle does not provide tax, legal, financial, or other professional advice. Listeners are encouraged to consult with their own advisors in these areas.

Brian Minier 0:06

Alright, everybody, huddle up. Play cuddle zone. This is the Financial Huddle. Ready?

Ed Beemiller 0:14

Greetings, huddlers, and welcome back, Huddle Nation, to our next episode of the Financial Huddle Podcast. As usual, I am joined by my partners in crime, Mr. Brian Minier. Howdy, howdy. Mr. Ryan Fleming.

Ryan Fleming 0:28

Love the energy, Eddie. Thank you. Phenomenal energy.

Ed Beemiller 0:32

We got a topic, man. We got a topic. How you guys been? You got everyone doing all right?

Ryan Fleming 0:36

Doing good, man. Cold. It's feeling feeling a little less cold. I hear you. It's been cold for a while, though.

Brian Minier 0:42

That groundhog uh what they say, he saw a shadow, right? Right. Another six weeks.

Ed Beemiller 0:46

Right. Yeah.

Brian Minier 0:47

That's all right. We're still doing good. Yeah, it happens. Yes, sir, man.

Ed Beemiller 0:50

It happens. Well, today's topic is life insurance a viable asset. I think, you know, looking back upon the recordings that we done, this may be one of the most polarizing topics we've covered. And the reason being is I always say everyone has preconceived notions and beliefs about anything, right? And we develop those over our lifetime. And there's a lot of talking heads out there, the Susie Orman's, the Dave Ramsey's who have a lot to say about life insurance. But once again, what are we trying to do on our podcast, boys?

Ryan Fleming 1:27

We're trying to bring the the light to truth.

Ed Beemiller 1:30

Financial literacy.

Ryan Fleming 1:31

Let's bring the truth We're bringing the truth to light.

Ed Beemiller 1:33

Yep. Facts are facts.

Ryan Fleming 1:34

That's right, man. So you know Facts don't care about your feelings. Exactly.

Ed Beemiller 1:38

So so when I say life insurance, nine times out of ten, when I have meetings with clients, I always ask this question is why do people buy life insurance?

Term Insurance And Real-World Story

Brian Minier 1:49

In case I die and my family needs some help.

Ed Beemiller 1:51

Exactly. That is that is the traditional thought process. That's what people believe. Life insurance is actually death insurance. Meaning I buy it, I buy it for peace of mind in case something happens to me. And then we when I die, hopefully, you know, my spouse children are still alive, then there's a financial gain for them.

Ryan Fleming 2:14

And and we call that what? Term.

Ed Beemiller 2:18

Correct.

Ryan Fleming 2:18

Term insurance.

Ed Beemiller 2:20

And that is from a traditional standpoint, term insurance is meant to basically fill a gap. So often you see families with young children. They may buy a 30-year term because they want to get the kids through growing up, through college, out on their own, independent. Yeah. And so that's a gap almost coverage. And when we're doing financial planning, we always focus part of that financial planning is we're talking about risk. And what do we always say? We're trying to put together a holistic plan without taking unnecessary risk. Unnecessary risk. So from that standpoint, insurance is a topic that we cover. And but there's multiple uses of insurance that a lot of people just are not familiar with. The traditional, as Ryan had stated, was you know, buying this term, and this is what you hear Dave Ramsey, Susie Orman all say, well, just buy term, because really you're just buying the death benefit. And that could be a very powerful tool. You know, I a case in point, uh a client of mine, uh, a couple came in and sat down, we went through holistic planning, looked at you know, uh managed money, we looked at some fixed income options, but life insurance was part of it because they had two small children, were about to have their third child. So we put together a a very detailed plan for them, which included term insurance. Well, lo and behold, the the one spouse basically was diagnosed and ended up passing from cancer at a very young age. So that left the other spouse with three young children, and they received literally a couple million dollars in term insurance, which enabled them to what they did, the remaining spouse was able to purchase a home for her in-laws basically to come down to help what her watch the kids because she had a business that was running. So that praised.

Ryan Fleming 4:13

Thank God, thank God they had that coverage, man.

Life Insurance As Living Asset

Ed Beemiller 4:16

You know, a blessing in a very, very difficult situation. Now, the other side of life insurance that most people don't know anything about, which is life insurance actually used during your lifetime as a tax advantage wealth accumulation vehicle. Another client isn't as concerned about legacy, has a lot of other assets, but loves a lot of the different aspects of how you can utilize this type of strategy, was able to build a effectively a second home, a lake home, got no traditional financing. So basically, as the name suggests, kind of you hear about bank on yourself, uh, wealth beyond Wall Street, infinite banking, some of these different concepts there for really high cash value life insurance. But he was able to borrow from his assets from that cash value, fund effectively a construction loan and then permanent financing, and then he just paid himself back over the years. So in that way, he he leveraged that asset, and that's what we speak to just as much as we do about speaking about the the death benefit when we're talking about those topics.

Tax Code 7702 Explained

Ryan Fleming 5:25

Yeah, and you know, I thought what we would do is just kind of ground the conversation because you're right, Ed, this really is a polarizing topic. Um, cash value life insurance or permanent life insurance um has got the whole spectrum of opinions that are out there. And um, so what I wanted to do is just take a half step back and really just educate the huddlers out there is like, well, where does this actually come to fruition? Like, how is this even so in our culture? And we got to go back to the tax code, okay? And the reality is that there's a million different places that our clients can park their money. And, you know, most of our huddlers are familiar with things like Roth IRAs, Roth 401ks, brokerage accounts, things like that. But this particular one, this life insurance thing, um, it just uh not a lot of people understand it like you talked about. But what we have to understand is that this tool, this vehicle gets treated different than any other thing out there underneath the IRS tax code. And so a lot of the rules and regulations that are centered around the advantages that we're gonna learn about over this two-part series that we're gonna get into has to stem back to tax code 7702. That's the part of the tax code that defines how you can actually open up a life insurance policy and work with inside the IRS parameters so that you have the appropriate ratio of death benefit, but it's structured so you can stuff a ton of money into it to create wealth, which is literally the complete opposite of what you started off our podcast with talking about term, right? So again, term is the lowest premium for the highest death benefit. And all we're doing here is we're doing the inversion, the inversion of that. We're trying to buy the lowest required death benefit from the IRS that allows us or you to stuff almost unlimited after-tax dollars into that money or into that account, into that policy, and have that money grow tax-free the rest of your life. So it stems from tax code 7702. So what I thought I would also do for the Huddlers is actually take us down. Um, here we go. It's it's that time. It is Hallelujah. And we're going to talk about some stats because I think third-party entity stats, other than just our opinion, uh, really bring evidence to the to the to why is this a viable option? So some of you guys might know this, some of you don't, but there's uh the most profitable business in the world, arguably, could be an industry that you used to work in. What is that?

Ed Beemiller 7:53

Commercial banking.

Ryan Fleming 7:54

The banking industry, right? Um, banks are incredibly, incredibly cash-rich, but there's something out there in our culture called Boley, B-O-L-I, which stands for Brian. Bank-owned life insurance. There's also something out there called Coley, C O L I. Ed, what's that stand for?

Ed Beemiller 8:13

Corporate owned life insurance.

Why Banks Use BOLI And COLI

Ryan Fleming 8:14

So the reality is that there's uh the most profitable business uh in the world, arguably banks, they have this thing called Boley. And towards the end of 2024, moving into 2025, at that time, there was almost $206 billion in cash surrender value on banks' balance sheets. Now, let's just think about that just for a minute. That that is unbelievable. Okay, so what do these banks know that we don't know? Okay. Well, uh to further the education for our huddlers out there, uh, there is over 3,000 banks as we sit here today. Almost 70% of the entire banking industry has money and bully bank-owned life insurance.

Ed Beemiller 8:59

Um what do they have in there?

Ryan Fleming 9:02

Uh well, we're gonna talk about that in a minute, but even better than that, all the big banks that you can think about, Chase Bank, the big boys out there, um, there's over $50 billion in cash value sitting in those types of uh banks. Yeah, big money center banks. Yeah, 80%, uh nearly 80% of those humongous banks that we can think of uh own bully. And why do they do that? Well, what they do for these large institutions, bully often represents nine to maybe almost 15% of their tier one capital. And for our huddlers out there, our listeners out there, that's very important because tier one capital is the capital used to measure the bank's financial strength. It is the most precious asset that they have on the books. Um, and so when they look to put that somewhere, they're looking for things that are stable, low risk. They're looking for assets that have tax advantages, which, if structured properly, we know that cash value life insurance has an amazing tax-free tax advantage properties to it. Um similar to a Roth. Very similar to a Roth. So these banks, to give you a little bit of an idea, Bank of America has 20, almost 24 to 25 billion dollars of cash value sitting inside life insurance policies. Wells Fargo has just under 19 billion. JP Morgan Chase Bank has just under 13 billion. You guys get the idea, okay? So these figures are astonishing to consider. Um they matter, but why do they do that? That's the question. Why would they do that? Well, that that cash surrender that they have access to, right? Like your friend had access to to take a loan against his policy to go buy that lake house, right? These banks have access to that, but it counts as far as their tier one capital. So it improves their ratios without taking more risk on what they can lend and what they can't lend. So that's a very important asset to those banks. And as we know, it provides stable, predictable rates of return to offset employee like benefit cost or something that they pay for. It's almost like it's a it's a it's a great bond alternative. These banks aren't buying their own bonds, right? They put uh put a lot of their money into cash value life insurance. And so when we think about that, and we think about how we want to take advantage of every nook and cranny that we can in the IRS tax code, this tax code 7702, if you know how to structure it properly, allows our clients, allows banks to dump in almost unlimited after tax dollars and have access, liquidity, use, and control to that, that's safe, that's secure, that's there at an institution that is one of the safest, if not one of arguably the safest places to store wealth ever in the world. Right. And so I thought our huddlers would like to understand a little bit about that, and maybe it helps their brain understand the validity of what we're talking about life insurance, if it's structured properly.

Rockefeller And Disney Case Studies

Ed Beemiller 12:02

Right. And and there, there's there's so much information out there, and that's kind of why we're making this a two-part series, because we can't cover everything in one meeting. But when we talk about you know, this is not something new, right? This has been around not for decades, but but for centuries. Yeah, 200, 300 years. And the reality of it is there's a lot of stories, there's a lot of examples of people, of corporations that have been utilizing this for you know for a very long period of time.

Ryan Fleming 12:34

It's not a mystery.

Ed Beemiller 12:35

Yeah, it's not a mess, it's not a mystery to them, right? You could argue it's a mystery to the general population, or you can argue that we're inundated by social media, all these financial talking heads who all say what? Buy term and invest and invest the difference. There's a lot of fallacies and along with that, because most people will buy the term, take the rest of the money, and just spend it. You know, that doesn't work.

Ryan Fleming 13:00

And we're not saying that every human being on planet Earth should own one of these policies. I do. It's a strong consideration. I believe that. I mean, they'd have to sell me on why not, right? Right.

Ed Beemiller 13:12

Yeah, and it's something that you know, obviously the three of us, we believe in and utilize as a piece, a piece of that puzzle. But you talked about banks, and everyone's familiar with you know, JP Morgan, Chase, you know, all these Wells Fargo, all these big banks. Well, let's let's take that down to individuals, you know, of some historical examples and and current examples. Well, I think most people have have heard of the Rockefeller family.

Ryan Fleming 13:40

Oh, yeah.

Ed Beemiller 13:41

Okay, you know, one one of the I'll call it blue blood, old old school, you know, families. Well, if you really read into the lives, how their family was built, how their legacy their investments in legacy, well, guess what? It was all surrounded around cash value, life insurance, and some very, very uh detailed uh trust uh and estate planning. But if you go into and hear that story, not only were they using the death benefit for intergenerational wealth, but they were using the cash value for liquidity within their estate. Also, if they needed capital throughout the lifetimes during these different generations, they had access and could borrow against that for different philanthropic purposes, all kinds of different things.

Brian Minier 14:35

Start businesses, whatever. And by the way, and by the way, for the listeners, we're not going to get into it today, but there's a really cool comparison between the Rockefellers and the Vanderbilts and the legacy that they left behind, and how much better the Rockefellers left behind in their legacy compared to the Vanderbilts because of what you're talking about.

Liquidity, Compounding, And Opportunity

Ed Beemiller 14:52

Right. And I would encourage you know the listeners out there, go ahead and Google the Rockefellers and put Rockefellers Life Insurance and it will come up with the whole story. And there's been several books written about it. Yeah. Another individual, although we we know the name more uh for uh an amusement park rather than Mr. Disney Walt Disney. This is a story not a lot of people know about, and I I love telling the story because this really just exemplifies the power of that cash value life insurance and the different attributes and the flexibility that it allows. But when he first pitched, you know, Disney World, went to the traditional banks, the traditional banks in his face in the 50s, looked at him and said, What are you kidding me? An amusement park in and in bait, literally all based on a mouse in the swamps of Florida? In the swamps of Florida? Are you kidding me? So he had raised capital, but it came down to a point where he went to that bank kind of for that final stage of capital to build it. They said no. Guess what he did? Well, he had this type of strategy that he had been capitalizing capital, basically making contributions over the years. He went to his high cash value life insurance pan and borrowed the capital that he needed for the final stage the project, to finish basically Disney World. And now, how many millions upon millions of people have either have gone, taking their kids, taking their families?

Ryan Fleming 16:28

Was that a good rate of return?

Ed Beemiller 16:29

To enjoy the good rate of return on that. So there's there's a lot of stories like this that are out there.

Brian Minier 16:35

So every time I go to Orlando, you're saying think about life insurance.

Ed Beemiller 16:38

Think about life insurance.

Ryan Fleming 16:39

I just keep in the thinking about the return on investment he got by having access to capital. Oh my goodness.

Ed Beemiller 16:45

That's what makes the world work, right? Having access to capital. Amen. Every business owner I ever talked to, you know, that's their what's their biggest impedien, you know, to moving on to growth. Well, the biggest obstacle is access to capital.

Ryan Fleming 17:01

Yeah. So 100%.

Ed Beemiller 17:03

It's if you take the time, which is what we're trying to do, financial literacy, if you take the time, get the facts, develop what the true understanding is and how you can utilize this, you'll see it from a completely different perspective.

Brian Minier 17:19

Yeah, so we're trying to make the point this is an asset. This is a viable asset. And to your point, the point is access to capital. I tell young people this is your opportunity bucket. When you were in your 20s or even in your early 30s, did you ever think, you know what? I know in about five or ten years there's a property that I'm going to be able to buy. Or a buddy of mine is going to want to start a business. You don't think of those things. By contributing to these cash value life insurance policies, you have capital for those opportunities that come up. So when you think about where do you get access to capital? And you may say, Well, I have a brokerage account. Well, what if the market is down? Are you going to access that when it's down? That is what kind of a vehicle? How long should you hold that?

Ed Beemiller 18:08

As long as you can. As long as you have it.

Brian Minier 18:10

Because guess what? When you take some sort of distribution from that account, what do you now lose? You lose the compounding effect of the money that you can do.

Ryan Fleming 18:18

You interrupt compound interest, right?

Brian Minier 18:19

But the type of policies that we're talking about, you don't lose that compounding.

Ryan Fleming 18:25

So think about that, Holders. I want to make sure they understand that. So if you have access to the capital without the interruption of tax-free growth on your money, that's a very powerful thing. That's a very powerful thing.

Brian Minier 18:35

It's huge. And that's why the opportunity is so beneficial because you can use it without interrupting that growth.

Ryan Fleming 18:43

And that's how money works best over time. That's how it grows best over time.

Positioning As Bond Alternative

Ed Beemiller 18:46

Just like any other wealth accumulation strategy, the earlier you start the better. I I basically, I don't want to say force, but I strongly encourage both of my both of my children to to start one of these plants. And it's because when we when we meet with people, the one area that we often see that they're falling short on is liquidity.

Brian Minier 19:08

That's right.

Ed Beemiller 19:09

You know, they may have all their money in a 401k, maybe they open a brokerage, everything else, but it's a little, especially when the pre-tax instruments, it's almost impossible to get a hold of that money for a liquidity need because of the penalties and everything else associated with that. And like you said, even in a brokerage account, you want to make sure you have true liquidity for those emergencies because you don't want to have to sell out of something that's really in a longer term bucket. Right. You know, those types of things.

Ryan Fleming 19:34

But Brian, you're right. A lot of people confuse the investment versus the and and they're not, it's like an apple in an orange.

Brian Minier 19:41

Yeah, that's why they that's why people knock on the life insurance because maybe the growth isn't what your Roth IRA is or your brokerage account. They're two separate things. Right. The the purpose of this is different than what those other vehicles are doing. Right. And when you understand that, then it's a lot easier to get that, oh, this is why this should be a part of my overall funding.

Ryan Fleming 20:03

And honestly, what they really are, if you boil it down to it, it's it's not it's not compared, it shouldn't be compared to an equity, it's more of a bond replacement strategy.

Brian Minier 20:10

Yeah, they're not competing relative to rate of return.

Ryan Fleming 20:12

They're not competing, they're working together. They're complementary. That's right.

Ed Beemiller 20:16

It's it's foundational wealth. Yeah. You know, it's not, as you said, it's not going to have the upside of a brokerage account, but guess what? It's not going to have the downside risk associated or if that's the same.

Brian Minier 20:28

On the other side to that, if you do take from your brokerage in an up environment, what do you have to do? You have to pay the taxes and figure that out while you're trying to get capital. Yep. This is why this has its own unique purpose.

Ryan Fleming 20:41

And and we're going to get into that in part two. Yeah. We're going to get into that to part two. We're going to go a little bit deeper into how to utilize it, you know, while we're making it.

Teeing Up Part Two And Closing

Ed Beemiller 20:48

That's why, you know, kind of sum this up. That's why there has to be a part two, just because there's so much information. What we wanted to do today was really just kind of introduce it, talk a little bit about some history with it, you know, the different types of life insurance and how they're utilized. So part two, which which we'll be coming, which I'm also very excited about. It's an exciting day. You know, we're gonna we're gonna talk about how are these plans designed, because it's very important that they're designed properly. You know, what are other uses in addition to just the cash value and being able to use this? Are there ancillary issues that these things can provide to help mitigate some exposure or some risks that investors or pre-retirees face? And then in today's economy, given where tax rates are, everyone's talking about increasing taxes. We're gonna touch more upon what are the tax advantages of this type of vehicle, and then really get into utilization, how best to utilize and how this you know, some of the names we talked about Bank on Yourself, infinite banking. Well, what do all those things have in common? The word banking. How can I utilize this tool appropriately? And really maximize the usage once again during your lifetime. You don't have to wait until you're six feet under. Big difference. So, huddlers, thank you for taking the time to listen. Definitely stay tuned for our next release, which is part two, which is gonna kind of what? Just bring everything together. We're gonna get it. You know, wrap it up and just give you once again what we're trying to do here is provide you more detail, more honest truth, you know, feedback. There are multiple uses. We're not saying one's right, one's wrong, but we want to make sure all that information is out there.

Ryan Fleming 22:35

So yeah, please like, follow, subscribe, tune back in, huddlers. See you next time. Till next time.