by Teresa Kuhn, JD, RFC, CSA

*Teresa’s latest book, “The 100 Year Real Estate Investor,” is set to hit outlets, including Amazon, this fall.

 

When you become a 100 Year Real Estate investor, you harness the power of something our team likes to call the “Dual Asset Strategy or DAS.” A dual asset strategy involves leveraging one asset to create two or more assets. Incorporating a 100-Year Real Estate Investor System with a specially-designed whole life policy driving it allows every single one of your dollars to do the work of three or four.

 

DAS is good news for those busy putting out the fires of inflation, wrong-headed government policies, threats of war, corruption, and catastrophes that could upend everything you’ve diligently worked to achieve. You don’t need a degree in economics to grasp how impactful and erosive these events will be on your wealth. However, you may not be convinced there’s anything you can do to protect your money.

 

In this chapter, I’d like to drill deeper into the benefits that set the meticulously-designed 100 Year Real Estate Investor policies apart from every financing option available. A 100 Year real estate investment plan moves you from being a helpless victim of circumstances into the more powerful of becoming your own “financial engineer.”

 

Here are a few reasons my clients, especially those investing in real estate, love their “100 Year” policies and the Dual Asset Strategy.

Reduced exposure to risk.

If you’re reading this, you are most likely someone who puts every penny of extra cash you have into building your portfolio of cash-flowing real estate. Intuitively, you realize there’s some risk in doing so because no matter how diligent you’ve been, there is no guarantee of future value.

The same goes for investing money into cryptocurrencies, precious metals, or stocks.

When the markets are down, your ability to access these assets declines quickly. Having some cash in a modified life policy increases liquidity with less risk since your cash value isn’t correlated to stock, commodities, or real estate markets.

Tax advantages. Similar to ROTH IRAs, dollars in your policy are added to guaranteed increases built into your insurance contract and through dividends. Dividends, of course, are not guaranteed. However, our firm makes it a practice to only work with companies with a history of not missing dividend payments for 100 years or longer.

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Death Benefit

I’ll be honest; the death benefit is not the primary reason most people purchase 100-Year policies. However, this “icing on the cake” feature also has tax advantages.

Guaranteed increases and any dividends are added to the policy’s cash value, and taxes on those gains are deferred. Under current IRS regulations, you can borrow against your contributions and gains without paying income tax.

When structured and maintained by a qualified advisor who understands exactly how these policies work, you can also take income to supplement your retirement tax-free.

That money goes to your beneficiaries tax-free and without getting tied up in probate court when you die. This benefit is valuable when you think about it, especially if you are a real estate investor leaving behind illiquid assets to your heirs. Such investments could trigger tax headaches for your loved ones and perhaps force them to sell a valuable income-producing asset to pay the IRS bill.

Safety, but with greater liquidity. As a cash management tool, I think the Dual Asset Strategy is without equal. It’s a safer means of obtaining growth while not surrendering liquidity. When you think about where you store cash right now, I wonder how easy it is to get that money when needed.  Think about it.  If your cash is in a brokerage account or crypto wallet, you’ll typically have to liquidate those investments before you can use the proceeds.  If you’re counting on tapping into your home’s equity, you’ll need to qualify for a HELOC, refinance, or perhaps sell the property.

If you don’t have one of our specially-designed policies, the only real liquid place to store your cash is in a bank account that might offer you very little interest, often less than 1%, and will sometimes charge you excessive fees for the privilege. Plus, if you have an interest-bearing bank account, taking out money means you’ll have an opportunity cost in the form of interest that you could have generated had you left the money alone.

When you borrow against your 100-Year Policy’s cash value, it’s similar to borrowing from a HELOC. You’ll be borrowing against the underlying asset’s value and continuing to experience that asset’s growth as if you had never touched a cent of the money. But, unlike a HELOC, borrowing from your policy won’t require a bank’s privacy-invasive applications and endless hoops. You won’t have to “qualify” or prove your creditworthiness. Also, if something unexpected happens in your life and you miss a payment, you won’t get credit dings as you would with other types of loans.

With a 100-Year policy, you choose the terms of your loan, including how much you’ll pay, when the repayments will start, and the frequency of your payments. The insurance company determines the interest rate, and you decide the rest of the details.

You may have creditor protection.

Depending on where you live, your whole life policy can give you additional peace of mind in case of lawsuits or other creditor actions. Real estate investors are magnets for lawsuits, both legitimate and frivolous. That’s why asset protection is so critical for property owners. Each state has different rules and thresholds for protecting life insurance cash values, annuities, and retirement accounts. Many states, such as Florida, cover all the money in a policy. Others protect amounts as large as $500,000.

PUAs- the power behind a 100-Year Policy

A 100-Year Real Estate Investor policy revolves around paid-up additional insurance or PUA. A PUA is a coverage that a policyholder buys with policy dividends instead of premiums as a rider on a whole life policy.

Policyholders can increase the death and living benefits by using a PUA that increases their cash value. PUAs will earn dividends, and their value continues to compound over time. A 100 Year Real Estate policyholder can also take loans against PUAs or surrender them for their cash value.

Creating “magic” with PUAs

PUAs effectively turbocharge your policy since their value can increase over time, and those increases will grow tax-deferred. Another positive aspect of a PUA is that you can use it to enhance your coverage amount without becoming subject to additional underwriting. This feature of PUAs is a massive plus for those who have experienced health issues since the policy was issued and no longer qualify for increased coverage.

Although certain insurers allow you to add it later, we structure a PUA into a 100 Year REI policy design when you purchase it. We customize our policies that way because age, health, or other factors could make it harder to add a PUA later.

The fact that rules and stipulations for PUAs differ among insurers underscores the critical importance of choosing a suitable carrier for your 100 Year Real Estate Investor policy. It’s been my experience that only a handful of dividend-paying insurance companies can handle the unique requirements for the kinds of contracts used in the 100-Year Real Estate Investor plan.

Teresa’s Takeaways: If you are an investor of any kind, I don’t need to tell you that the current financial upheaval will only worsen in the coming years.

While you cannot control policy blunders, natural disasters, or market volatility, you can do your best to bake resiliency, greater control, and liquidity into your financial planning.

The Dual Asset Strategy, powered by creatively designed and thoughtfully managed whole life insurance, offers an abundance of benefits that give you greater safety and flexibility. These are not your grandparents’ whole life insurance policies but are versatile, high-liquidity financial tools that fit nicely into almost any investment strategy.

If you have a long-term mindset committed to risk-resistant, tax-advantaged growth, you may benefit from having a DAS in place. If you’d like to discover more or want to get on the notification list for my new book, please get in touch with me at 800-382-0830.