What is the Checkbook Life Insurance® Strategy?

The Checkbook Life Insurance Strategy enables your money to work for you in two places at-once, simultaneously generating tax free internal policy returns AND investment returns from cash-flowing alternative investments.

• Create a secure asset by funding a Checkbook Life Insurance Policy
• Leverage the Checkbook Life Insurance Policy by using it to secure a line of credit with low interest rates and flexible interest-only payment terms. The Checkbook Policy is unaffected by the loan and keeps on compounding at a rate that exceeds the loan interest.
• Invest the loan proceeds in secure cash-flowing investments that provide a predictable high rate of return.
• Generate cash flow from your investment AND from your Checkbook Life Insurance Policy
• Tax-deductible interest-only payments can be made from investment cash-flow.
• Cash Value and Permanent Death Benefit keep on growing tax-free
• Continuous compounding policy growth increases the cash value available for investment

What is a Checkbook Life Insurance® Policy?

A Checkbook Life Insurance® Policy is specially designed to accelerate your cash value accumulation within a permanent life insurance product. Permanent life insurance policies have multiple components, including (1) a death benefit and (2) a cash account, which grows each year at a compounding rate.

An optimized permanent life insurance policy, from a carefully selected life insurance company, can provide a compound annual growth rate (CAGR) between 4%-8%, based strictly on a policy’s internal growth. All policy internal growth is tax-free, creditor protected, and is not exposed to market volatility. Policy cash value can then be leveraged for investment into other high yielding assets – without reducing the policies internal rate of return. This provides the investor with consistent compounding returns inside the life policy PLUS the returns on the outside investments, leveraging the same funds twice.

How is a Checkbook Life Insurance Policy leveraged?

The cash value of Checkbook Life Insurance Policy is a liquid asset that can collateralize loans from the issuing life insurance company or a traditional bank. The issuing life insurance carrier will provide a loan secured by policy cash value without any loan underwriting – all you have to do is submit some simple paperwork and the funds will be in your bank account within days. No questions asked.

Other lenders are also eager to lend against policy cash value and provide very attractive loan terms, but require more paperwork. The optimal lender for you is determined at the time that a loan is applied for. Loan interest may be tax-deductible as either investment interest expense or business interest expense, depending on how loan proceeds are used.

Can I use Checkbook Life Insurance loan proceeds for personal expenditures?

Yes, Checkbook Life Insurance Proceeds can certainly be used for personal expenditures – you can be your own bank and bank on yourself. It is a store of value that may replace your traditional banking needs, acting as your private reserve. However, the Checkbook Life Insurance Strategy is not a banking concept – it’s an infinite investment concept.

What are the tax benefits of life insurance policies?

Life insurance policies provide powerful tax benefits. The benefits were so attractive to high net worth investors that congress created the MEC laws to limit the rate of cash value accumulation within life insurance policies. We design polices to maximize your cash value within the MEC limits.

• Life insurance cash value growth compounds completely tax free from both Federal and State taxes, like a municipal bond fund.
• The higher your tax bracket, the greater your benefit from tax-free growth; the higher your tax bracket, the greater your tax-equivalent yield on tax free growth.
• Life insurance policy loan proceeds are received completely tax-free
• Life insurance cash value can be withdrawn tax-free up to your basis.
• Life insurance death benefits are completely income tax free to beneficiaries
• With proper structuring, life insurance death benefits can be passed to beneficiaries exempt from estate tax. Attaining this estate tax benefit using an Irrevocable Life Insurance Trust (ILIT), while still retaining lifetime benefits, requires very careful structuring.
• Policy loan interest may be deductible as either investment interest expense or business interest expense

What are attractive characteristics of a properly implemented cash value life insurance policy?

The internal mechanics and configuration of life insurance polices vary considerably. It’s an unfortunate reality that these versatile financial tools are not fully understood by sellers and buyers of insurance.

• A life insurance cash account is an asset of the policy owner, not the insurance company.
• A life insurance cash account experiences compounding growth, earning income on income.
• Life insurance cash value can be borrowed against. The life insurance company and other lenders will lend money to the policy owner, secured by the policy cash value.
• Cash value continues to compound even when it collateralizes a loan, if properly designed.
• You earn compound interest on your cash value, but pay only simple interest to the lender.
• Highly-rated insurance companies are among the most financially stable institutions in the world, with consistent dividend paying history going back to the 1800s. The financial strength of these companies was most apparent during The Great Depression and the recent Great Recession, throughout which they continued to pay high-dividends to policy owners.

Can a Checkbook Life Insurance Policy be used for retirement planning?

Yes, and it can be a very attractive retirement planning vehicle on its own or in conjunction with other retirement planning tools. The cash values that accumulate over decades of compounding can be accessed tax-free during retirement – similar to a Roth IRA or Roth 401k.

A Checkbook Life Insurance Policy has the following attractive retirement planning characteristics:

• It is has no/low correaltion to the market
• It is shielded from market volatility
• You can grow your retirement fund by leveraging the cash value to invest in any asset that you choose
• It is not subject to contribution limits
• It has no required minimum distributions
• It is not subject to the prohibited transaction rules
• It is accessible without penalty at any time
• The existence of a permanent death benefit allows you to more aggressively spend down other assets in your portfolio during retirement.

Who should consider a Checkbook Life Insurance Strategy?

The strategy is not ideal for everyone. Following are characteristics of people for whom this could be very attractive. Overall, the higher your tax bracket the greater the appeal. The more affirmative answers you provide to the following questions, the more likely that you’re well-matched to the strategy.

• Do your investable assets far exceed amounts that can be contributed to IRAs and 401(k)s?
• Do you want to accumulate funds for investment in alternative assets?
• Do you understand and appreciate the use of leverage to multiply investment returns?
• Do you value or need a permanent death benefit for your loved ones?
• Are you in a high tax-bracket?
• Do wants to invest in alternative assets without the regulatory limitations of IRAs and 401(k)s, such as prohibited transactions and contribution limits?
• Are you looking for a safe, liquid, protected, and tax-free cash accumulation vehicle for assets?
• Do you have assets that you want shielded from market volatility?

The strategy is ideal for investment in real estate, mortgage notes, private lending, tax liens, litigation finance, merchant cash advance, life insurance & viatical settlements, medical settlements and other cash-flowing investments.

Real estate investors refer to leverage as OPM – the use of Other People’s Money – to create wealth for yourself. OPM can come from private investors and banks that are secured by proven assets – and is most often associated with with real estate financing. Cash value life insurance can be leveraged even more easily than real estate. 

Who should not consider the Checkbook Life Insurance Strategy?

The strategy’s benefits accelerate over time and to achieve its goals it is strongly recommended that investors commit to funding at least $10,000 per year for 5 years. For anybody that may not meet that threshold, we advocate focusing on self-directed retirement accounts.

Do you think the Checkbook Life Insurance Strategy may be right for you?

To explore the Checkbook Life Insurance options that are best matched to you, schedule a complimentary consultation using this link.