Why High Net Worth Families Keep Money In Life Insurance - Part 2

5-ish Minute Private Family Banking Podcast.
 
Why High Net Worth Families Keep Money In Life Insurance - Part 2
 
Private Family banking is a long-term financial strategy. We teach people how to leverage a high cash value permanent life insurance policy to take control of their household finances.
 
In this episode, continue the discussion around why high net worth families keep huge sums of money inside life insurance policies. If you missed Part 1, go back and listen now. Today we cover conservative and stable returns, access to capital without going through loan approval processes and the continuous growth aspects of the Private Family Banking Strategy.
 
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Transcript

SPEAKER_00 0:20

Hey guys, Mike here. Welcome to the five-ish minute private family banking podcast. We're in part two right now of our mini series about why high net worth individuals like to keep large amounts of money inside of a whole life insurance policy. If you missed part one, go back and listen to it. We looked at the tax advantage side of doing this using this strategy. Today we're going to look at a couple of other reasons why people who have a high net worth like to keep money inside of a properly structured whole life insurance policy. Okay, the first thing we're going to talk about today is the stable bond-like returns inside of the whole life insurance policy relative to the cash value that's there. Last time I mentioned that high net worth individuals don't do this because they're chasing the high return. They likely get uh much higher returns in some of the other things that they're doing in their lives. Um but these policies typically try to target somewhere between four and six percent uh on the cash value inside of the whole life insurance policy. What this does is this guarantees a conservative, positively moving uh dividend or growth with that cash inside. So again, the purpose is not to seek after that high growth, but to give themselves a conservative, always positively growing uh pool of capital that they have access to. This the returns are not also they're not tied to the stock market, okay? So it makes it attractive as a sort of safe bucket of money inside of a part as part of a larger portfolio, maybe that they have uh access to and their other things they're doing in their life, or they're maybe assuming a lot more risk, whether it be private equity, stocks, businesses, real estate investments, things like that. So they've got plenty of risk elsewhere. They use this as sort of the safe bucket that's gonna be the conservative piece of what they're doing, and it gives them access to cash. And that's the second thing we're gonna talk about is the liquidity that comes from using the strategy of private family banking. Okay. Using the strategy gives those people uh access to their own capital on their own terms, okay. Once there's enough cash value built up inside of the policy, they can then borrow against that uh with no credit check, no underwriting, and they control the terms of repayment of that capital. Okay, they're effectively using the their insurance policy as their own private uh equity line or private line of credit. In other words, it's their own personal bank, which is why we call it private family banking. Now, this lets them also, it gives them the opportunity to move quickly on some deals because without having to go through uh a loan application process, without having to uh go through the loan approval process, they have access to the cash that they've built up. So if they see a business deal or private equity deal or uh a real estate deal that they want to get involved with, they can access this cash quickly without going through all the other stuff. And they can move quickly on that opportunity. And they can do so without triggering the ta uh taxable capital gains that they would incur if they say liquidated some of the other assets they have, like stocks inside their brokerage account or something like that. Okay. Lastly, for today, we'll talk about how when they do this, one of the benefits of this strategy is that they keep their money compounding while they use it. Okay, when they borrow against their cash value, um, they're not borrowing from their cash value. That loan that they take out is only used as leverage against the death benefit. So, what that means is that they can use the money over here for whatever uh investment they want to uh jump on, and at the same time, their cash continues to grow over here as though it wasn't touched. The full amount of that cash value is continuing to grow while they use it. So this creates sort of a multi-use dollar situation, compounding the policy while their money is deployed somewhere else where it's going to earn them a higher return, right? Uh, so when you look at this over the long time term, this leverage, when coupled with the uninterrupted compounding, is a key feature that high net worth individuals are looking for and why they like to keep uh large amounts of cash inside of a properly structured whole life insurance policy. So, two things there. Um, if if you're uh interested in tuning in again, we're gonna have part three coming up uh next time. Uh, and we're gonna talk about a couple other features that these policies can have that the high net worth people like to take advantage of. So, like, subscribe if you can, share this with your friends. We're trying to spread the word about private family banking as a strategy and let people know what's out there because a lot of people don't have education on things like this. Until next time, out