Paying Interest Infinite Banker

[SamIam]

I like the concept but the one thing these seems scammy to me is when I hear people saying they are paying the interest back to them which is not really correct. Yes, they might get it back indirectly in form a dividend but it doesn't directly get paid back into the policy. The money is being borrowed from the general fund, not the policy.

I had one guy tell me to say he wants to pay a high-interest rate back. He always charges himself 12% on anything he borrows because he wants to be profitable. So basically he is overcharging himself and other people who aren't doing the same will get the same benefit as him which doesn't make sense to me

Am I'm missing something?

 

[DHK]

https://davidkinderfinancial.wixsit...le-post/2018/09/21/Infinite-Banking-Explained

 

[SamIam]

Very good article probably one of the best I read.

 

[DHK]

There are just too many "interchangeable" terms and agents are notoriously bad at keeping them straight.

Master the vocabulary of how life insurance works, and everything becomes far clearer.

Ever hear the myth that "Cash value life insurance rips you off because the insurance company keeps the cash values when you die?" Once you understand the terminology and the economics within a cash value contract, you can always disprove this farce.

I did that here: https://davidkinderfinancial.wixsit...rance-Company-Keeps-My-Cash-Values-When-I-Die

 

[marindependent]

DHK thanks for suggesting the article from David Kinder. Its relatively well balanced.

In theory, I believe Infinite Banking can indeed work, however so many consumer just have trouble paying the electrical bill.

 

[Allen Trent]

DHK thanks for suggesting the article from David Kinder. Its relatively well balanced..

I am guessing DHK is David Kinder. not that it is a problem, just pointing it out. So thank him twice. Great article

 

[Allen Trent]

https://davidkinderfinancial.wixsit...le-post/2018/09/21/Infinite-Banking-Explained

Great article. Besides the phantom tax reported if the policy implodes, isn't it also true that a 1035 of the life policy to a new Life or Annuity can trigger the similar phantom taxes on the outstanding loan if there are gains in the policies. If possible, isn't it better to pay off the loan, surrender PUAR (if any) to pay off/down the loan or change loan to a withdrawal on UL?

 

[DHK]

First - I can be wrong on this, so if one was to attempt to do something like this, definitely check with the advanced underwriting departments - just to be sure.

A 1035 exchange is a tax-free exchange of cash values and transfer of basis from one contract to another. I don't see a problem transferring a life insurance contract with an outstanding loan to another life insurance contract because you're transferring the basis as well. As always, check the numbers and check with underwriting.

Doing a 1035 exchange of a life insurance contract with a loan to an annuity... well, you can do it... but why? If the policy isn't "healthy" in the first place (assuming over 50% of cash values are being borrowed against) - why would we transfer the remaining to an annuity? To me, that doesn't make sense. Of course, every situation can be different.

 

[Allen Trent]

A 1035 exchange is a tax-free exchange of cash values and transfer of basis from one contract to another. I don't see a problem transferring a life insurance contract with an outstanding loan to another life insurance contract because you're transferring the basis as well. As always, check the numbers and check with underwriting

In the cases I have seen, the releasing carrier extinguishes the loan & thus is the one reporting in some cases a taxable gain on a 1099 depending on the amount of the loan balance & taxable gain. (maybe my experience with the handful of cases involved only carriers that wouldn't process a loan to the new carrier & thus reported 1099 in a negative manner)

I just found this article online right now that explains it.

https://dbs-lifemark.com/beware-tax-implications-1035-exchanges/

 

[DHK]

Yeah... my thoughts would only be if the loan could carry over from the prior company. (I obviously don't do much of that.) I'd rather see someone just get a new policy or just pay off the existing loan.