79. How to Double Dip on Gains Tax Free Using High Cash Value Life Insurance Policies with Money Insights

00:05 Dr. Ann Tsung Are you struggling to advance your career and sacrificing time with your loved ones because of endless to-dos, low energy, and just not enough time in the day? If so, then this podcast is for you. I am your host Dr. Ann Tsung, an ER critical care and space doctor, a peak performance coach, a real estate investor, and a mother of a toddler. I am here to guide you on mastering your mind and give you the essential skills to achieve peak performance. Welcome to Productivity MD, where you can learn to master your time and achieve the five freedoms in life.

00:52 Hello. Welcome to Productivity MD show. Over here, I am with Brenyn and Blake. They are the wealth strategists with Money Insights. What they specialize in is high-cash-value life insurance, so you can actually double dip on your gains tax-free. On Productivity MD, we are all about efficiency. Money efficiency is one of them. So thank you guys, Blake and Brenyn, for coming onto the show. Please tell the audience a little bit about you and why they should care about high-cash-value life insurance.

01:24 Brenyn McConnell Yeah, thank you, Ann. We’re super excited to be here. Blake and I are both super passionate about alternative assets, cash flow, and financial independence. We work with a firm called Money Insights. Money Insights is the alternative wealth-building firm for high-income earners. Again, we love specializing in cashflow, financial independence. You wouldn’t hear us talk about traditional retirement methods. So going up, going through college, as you’re going through school, you’ve probably heard of the traditional method of 401(k)s, IRAs, stocks, bonds, mutual funds. That can be a great method, but we are a firm that focuses on creating cash flow and financial independence. Specifically, today, we want to talk a little bit more about how you can leverage high-cash-value life insurance to best boost your investment returns. First, I just want to talk about who this is most impactful for. The people that will find this most impactful are, again, high-income earners—usually, physicians, business owners, dentists—anyone that has that high income and has a desire to invest and take control of their wealth building. Who this is not for is anyone that is kind of just wanting to be on autopilot. If you’re the kind of person that loves just setting up the 401(k), letting it ride and sit there forever, this probably isn’t the right stop, the right method for you. But if you are somebody that wants to take more control of your financial freedom, this is probably a great place to start and should be some really valuable information for you.

03:05 And so let me dive into a little bit more about what alternative assets are, what I mean when I say alternative assets. That would be any sort of single-family real estate, multi-family real estate syndication, self storage, debt funds, private equity, cryptocurrency. All of these are assets that we would describe as alternative assets. These are things that people look to, to create different streams of cashflow income. One of the challenges that a lot of our investors face, or a lot of investors face that are investing in these kinds of assets, is finding out how to get a return in between investment deals. These deals, they come around often but sometimes there’s gaps. There might be three, six-month gaps, maybe even a year-long gap, in between some of these deals. And so people want to figure out how to get their money working for them when it’s not in those kinds of deals. They also want to remain liquid. So they need the ability to jump on any new opportunities that come their way. And so another challenge is, hey, how do we get our money working for us but also keep it liquid? Another big thing is creating tax-free income, right? Everybody is looking for any sort of tax breaks or tax benefits that they can get. The more tax-free income that we can get and more streams of tax-free income that we can set up for ourselves, I think most people would view that as a huge benefit and something that they’re looking for. Then finally, we want it to be safe. If we’re keeping money sitting on the sidelines, waiting for the next deal, we need our money to be safe. We don’t want it to be invested in a risky stock, that stock drops, and all of a sudden, our money isn’t there to pull out. It’s not liquid, right? So we need it to be safe, liquid, predictable.

04:49 This is kind of what made us start thinking about, hey, we need to figure out a better way for an opportunity fund. An opportunity fund is just a place that we store money in between investment deals. And where most people keep that traditionally is a bank account, a money market, a brokerage account. That’s usually where they’re storing their capital, in between these kinds of investment deals. Again, if it’s in a brokerage account, it’s probably in a cash equivalent. Because they need that money to be safe, predictable, liquid, and so it just usually ends up being a checkings or savings account. And so what we’re looking to do is get a much more efficient account going. We’ve discovered a strategy that allows investors to do the exact same investing while increasing their returns, without adding any additional risk. And what we call it is the Investment Optimizer. Blake is going to dive a little bit more and go into detail about what this looks like and how this works.

05:47 Blake Brogan Yeah, great. Thanks, Brenyn. Yeah, so the Investment Optimizer strategy—just kind of like Brennan described there— is really a way to leverage high-cash-value life insurance. You use that as your opportunity fund, where you’re storing your money in between deals, and then leverage that account to go do the exact same investing that you would have already done. So one of the cool parts that we like about this strategy is that you’re not at all changing what you’re investing in—just really where the money is sitting in between those investments. And we can do so by maintaining the liquidity and the security that Brenyn just talked about.

06:19 Now, we know when we bring up life insurance, there’s a lot of different opinions that you might hear about it. Some who understand the strategy are extremely passionate about it. They love it. They speak very highly of it. We realize there’s people who don’t love life insurance. You might have heard negative things about it. Now, the one kind of caveat I want to make sure to mention here is, we’re talking about a very specially designed life insurance policy. What I mean by that is, really, when you think of buying any type of insurance, typically you’re thinking, “Hey, what’s the coverage I can get, and what’s the least amount I can pay for that?” This is the complete opposite — where we’re saying, hey, how much money do we want to be storing in these policies to be able to do some of the things we’ll talk about here in a minute. Then from there, how do we minimize the cost or, in this case, minimize the insurance? So we want maximum cash value—that’s kind of your liquidity—and minimizing the cost of insurance as much as possible. So we’re talking about a very specially designed type of life insurance policy. When you do it in that way, you’re building what we deem to be the perfect opportunity fund, okay?

07:23 So these high-cash-value life insurance policies—again, when set up and when we utilize it correctly—have some very unique characteristics that’s hard to get in really any other type of asset. The first being is that your money is going to be growing at a net, after all costs and fees, five-plus percent return over the long term. Additionally, we have liquidity in this account. Very important, of course. If we’re using that as our opportunity fund to go out and invest, we need to have that money liquid. You can tap into these funds as soon as 30 days after you get it set up. Additionally, there’s safety. We’ll go into some of the details here. But there are guarantees in these contracts that we’re setting up, so by contract, your cash value can never go down. It’s guaranteed to grow each and every year. Additionally, we’re getting this five-plus percent return on a tax-free basis. So even some of the high-yield savings accounts right now might be yielding a couple percent. But again, at the end of the day, it’s taxable. So that’s where this can really start to shine. Then one of the other benefits is: we’re not necessarily designing these policies for the death benefit. I mentioned we’re trying to minimize that as much as we can. However, by flowing some significant capital through these strategies, you’re going to create a tax-free death benefit that’s going to go on to your beneficiaries. This is just a benefit that you get that you don’t have to pay for in any other way. Again, it’s not our focus, but a lot of our clients are creating seven to eight figures of a wealth transfer to the next generation simply by utilizing this tool.

08:48 Then the big piece here is the ability to have your money growing for you in two places at once. I know, Ann, you mentioned this as we kicked off. This is really the key to the strategy, where we’re able to get all of these benefits in the opportunity fund, and we can then use those funds to invest and have our money growing for you in two places at once. So I’m going to show you exactly how this works. So just to kind of give you a high-level overview before we get into the details: basically—before, people are implementing the strategy—if you’re building up money in a bank account and you have an opportunity to go invest in a fund that’s going to earn 10%, you leave it in that fund for 15 years, you would have generated $417,000. Right? That’s a good 10% return over 15 years. But by simply changing where you’re storing your money and then leveraging the strategy, which I’ll go into here, the exact same fund would have produced over a 13% return. So we had additional couple $100,000 of wealth that was created using the exact same fund investment, but simply just changing where we were deploying the capital from.

09:51 So let me get into exactly how we can have our money growing for us in two places, because this is kind of the big piece to this strategy. So we have this guy over here. We call him Dr. Z. He’s got a cool haircut, right? He’s taking his money, and he’s funding it into this opportunity fund, right? This bucket on the left here, this represents your high-cash-value life insurance policy. So these are the dollars that Dr. Z is eventually going to invest his first puts into his opportunity fund, and he starts to get all those benefits I talked about. Now, when he’s ready to invest, as opposed to withdrawing your money from the account—like with a bank account or a brokerage account—because you want to put it into investment, by having this cash value life insurance policy, by contract, you get access to this much bigger bucket of money. On the right, the bigger bucket of money represents the general account of the insurance company. So the insurance company that you have your policy with, anytime you want, will give you a loan. Okay? So when you request, let’s say you request $100,000. That $100,000 goes and hits your bank account. You take that $100,000, and you invest in whatever you are going to do anyways. You get the cash flow from that investment. Strategically, what we’re doing is just using that to repay the loan that we took and build up our opportunity funds. So the cycle just continues on and on. Now, the big piece here is this line in the middle. And really, what that represents is, as we took a loan against the policy and used that to go out and invest while we were doing that activity, the money in our cash value, in our policy, continued to grow and compound tax-free because we never actually took the money out of the policy. We essentially used it as collateral, and now we had our money growing for us both in the policy and, by utilizing the loan feature, now we can access the funds of the insurance company, invest those. And very literally, we have our money growing for us in two places at the exact same time.

11:44 Dr. Ann Tsung Is there a limit to, like, say, you only put in 25K, does that mean there’s actually a limit? Can you only loan out 50? Or how much more, over what you put in, can you loan out?

11:55 Blake Brogan Yeah, that’s a great question. So the insurance companies typically allow us to borrow up to 95% of whatever’s landing in our cash value. So whatever the cash value is, you can access up to 95% of that. In your example, Ann, if I’m putting in $25,000 a year, in the first year, it’s going to be less than $25,000. There are some costs to getting these policies going. Typically, 80% plus or so is going to land in the cash value in the first year. As time goes on and we continue to fund it, there’s going to be significantly more in the cash value than what we put in. Maybe over the course of 10 years, you’ve put in $250,000, your cash value might be $350,000—just for example—and now we can borrow 95% of that 350K.

12:37 Dr. Ann Tsung How long right after you put it in—say, you invest $25,000 now—can you start borrowing from it?

12:42 Blake Brogan Yeah, within 30 days. So as soon as we fund it. Again, as long as things get processed, they basically allow you to access it 30 days after you funded it. So, basically, immediately.

12:54 Dr. Ann Tsung Okay. And to clarify—I think you might be talking about this later—when you talk about tax-free gains, is it growing tax-free in the opportunity fund as if you’ve never taken it out?

13:05 Blake Brogan Correct. Yep, so as your money is growing at that 5% plus return, there’s no tax. There’s nowhere to report that. You’re not getting a 1099 for that. Now, when you take a loan to go invest, you’re still going to have whatever taxes are associated with that investment. But while you were out investing, your money was still growing for you in the policy, and all of that growth is tax-free.

13:25 Dr. Ann Tsung What about the growth? Say you invest in a syndication, put in 25K, 50K. You take that. You take it out the opportunity fund, invest in the syndication. What about distributions from that, the gains from that? Is that tax-free or not?

13:37 Blake Brogan No, so you’re not actually investing inside of an insurance wrapper. So using your example, if I took a policy loan for $25,000 or $50,000 and I invested that, that’s now outside of the policy. Now, the portion that was acting as collateral in my policy, that’s growing tax-free. But if I invest in that syndication, I’m going to get the same tax treatment, regardless of whether I used the policy or if it came from a bank account.

14:00 Dr. Ann Tsung Okay. Got it. That’s clear. Okay, thank you.

14:03 Blake Brogan And then lastly, I’m talking about taking this loan, right? So we’re literally borrowing money from the insurance company, and they’re charging us an interest rate. Our cash is sitting in the policy, and it’s earning an interest rate as well. So those rates can fluctuate. Typically, the loan rates we’re seeing right now from the insurance companies are right about 5%, and our money is growing at about 5 % as well. So if we have a loan and our cash is growing at the exact same rate, naturally you think, okay, it’s kind of a wash. But really, the power of this strategy is that: as we take that loan and we repay the loan with the cash flow from our investment, we’re paying that back with simple interest, and our money—because we never had to remove it from the policy—continue to grow with compounding interest.

14:47 So just for an example, let’s say we took $100,000 loan at 5% interest, and you repaid it over 20 years. The cost of doing that would have been $60,000, and that interest cost is going to the insurance company. That’s revenue to the insurance company because you borrowed your money. Now, at the same time, we never had to remove our $100,000, right, because we took the insurance

company’s money. So our capital remained in the policy growing at the same 5% interest rate. Over the same 20 years, it would have grown by $165,000, right? So even though we’re earning five and paying five, this idea of compound and simple is very powerful—where we earned 165; we paid 60. So that’s a net gain to us of $105,000, plus we would have gotten any returns that we used in the investment as well. This is simply just isolating what’s happening inside the policy.

15:38 Dr. Ann Tsung For those people who don’t quite get, is there any one liner that you can explain—maybe like a timeline on when they calculate interest, like simple versus compound—so that they can see why it is such a big difference?

15:50 Blake Brogan Yep, so think about a mortgage, right? So as you take a mortgage, you’re going to make the same payments, let’s say, for 30 years or 15 years. Your payment never changes. That’s locked in. But if you look at your statement each year, each month as you make a payment, more and more is going towards principal and less is going towards interest. Right? Initially, a lot of that cost is interest. The same thing works when we take a policy loan. As we take that loan, there’s some interest costs. And as we repay that, more and more is going towards principal and less towards interest over time. Where our money on the other side, we earn 5%, and then the next year, we earn 5 % on top of that. That’s how we get the compounding effect. As we pay down that loan, it’s a simple interest, if that makes sense.

16:36 Dr. Ann Tsung So what you’re saying is, say, okay, I take out 100K loan. I’m paying 60K for it—that’s what it sounds like—back to the insurance policy. But because I didn’t technically remove my $100,000 from my policy, my policy actually has grown $165,000. So what you’re saying is that I actually made $100,000 by borrowing $100,000.

17:00 Blake Brogan Yes, yes, exactly.

17:00 Dr. Ann Tsung That’s what it sounds like.

17:01 Blake Brogan Yeah, and that’s over the course of 20 years, and that’s assuming the exact same interest rate. So we’re saying, hey, you’re paying 5% over the course of 20 years; you’re earning 5% over the course of 20 years. And yeah, we’re still able to create a pretty significant spread by having our money compound and paying simple.

17:17 Dr. Ann Tsung Yeah, versus if you just had your $100,000, say, real estate syndications, it’s basically gone from your bank account and it’s not earning anything at all whatsoever besides whatever your gains you’re having.

17:32 Blake Brogan Exactly right. And we love that, right? You still should do the same investment. You’re going to get a higher return in the syndication than you are in the policy. But the whole point of the strategy is it’s not replacing the investment, it’s replacing the bank account. Exactly, you hit the nail on the head, Ann. If I invest from my bank account, I have to remove the 100K, put it in the investment, and I get all the great returns there. Where if I have it in the policy, I can take a loan against it, and then now I have my money still compounding for me in the policy, and I’m in the exact same investment.

18:03 Dr. Ann Tsung Well, I wish I had known about you guys when I sold my coveted house. I had to put the gains into two syndications. Darn.

18:09 Blake Brogan Yeah. Well, now you know. Now you’re finding out, okay.

18:14 Dr. Ann Tsung Next step. Okay.

18:15 Blake Brogan Okay. So what I wanted to hit on here is that it’s the exact same investment flow. The strategy can maybe seem complex. It’s really not doing a whole lot differently than what you’re doing now. Because then, typically, before people are utilizing this strategy, as Brenyn mentioned about using a bank or savings account—you build up your cash in there, you go to work, you make income, you build it up—okay, now you have an investment opportunity. You take the money out of the account, put it in the investment. We get the cash flows from that. Where does it go? It goes right back into the bank account that’s not doing a whole lot. You just build that back up, rinse and repeat the cycle. With the investment optimizer, everything is the exact same, other than where we’re storing our money—in between deals. So we’re capitalizing our opportunity fund. We’re paying premiums to a life insurance company, building up our cash value. When we’re ready to invest, we take a loan against it and then put that in the investment, just like we would have otherwise. We get the same returns from that investment. And as opposed to putting it in the back of our bank account, now we have a more efficient place to put it, which is back into the policy. We build that back up. And again, we just repeat this cycle over and over. So it’s the exact same investing. All you’re doing is switching where you’re storing your money in between those deals.

19:26 Dr. Ann Tsung How long are these loans, basically, or it depends?

19:29 Blake Brogan That’s a great question. One of the reasons we love this is because it’s completely up to us on when you pay that back. So let’s say you take a loan for 100K. The insurance company’s charging you the 5%. But they’re not saying, “Hey, you need to pay us back monthly.” They don’t even ask what we’re using the loans for. The reason that that is the case is because they have our cash as the collateral, right? So they are happy for us to pay them back at any point. They’ll send us a statement each year saying, “Hey, here’s the interest you owe.” Even if you don’t pay it each year, it just gets added to your loan. We go into the next year, and now your loan is a little bit higher. So we as the investors have total control over when, or frankly even if we ever repay that loan. Because eventually, the death benefit on the policy will pay the loan. So it gives us complete flexibility that way.

20:16 Dr. Ann Tsung So you’re saying that I could invest in a syndication, that maybe in five years still exits. Theoretically, I don’t have to pay it back until they exit and I take the gains and pay it back to policy.

20:27 Blake Brogan We have clients do that all the time. That’s exactly right.

20:30 Dr. Ann Tsung Is that going to be a lot of interest accumulated in the five years though? It also depends on the gains too.

20:35 Brenyn McConnell Yep. So typically, our recommendation is, at a minimum, pay the loan interest back each year. Using that example, if you take $100 ,000, the loan interest is $5,000 each year. Our recommendation is to pay that 5,000, whether it’s cash flow from the investment. Typically, it’s where people get that or from any other source. The reason we like to pay that loan interest is because it keeps it simple, right? Meanwhile, our money is compounding over here. As long as we’re covering that interest, the 5,000 each year—not paying the principal back, just the 5,000—that keeps that loan simple and that’s how we’re creating that arbitrage, as long as we can cover the loan interest each year.

21:12 Dr. Ann Tsung Okay, so if they’re doing it for five years, essentially they’ll be paying 25K, right? Am I doing that math right?

21:19 Blake Brogan Correct, yep.

21:20 Dr. Ann Tsung 25K. But they don’t have to pay the 100K back until they exit or until the deal exits, then they pay back the whole thing. That’s what it sounds like.

21:30 Blake Brogan Yes. And while that’s happening, your $100,000 was compounding. So in the first year, it earned 5%. So you have 105, and then it earns 5% of the 105, right? So the compounding is happening at the same time while we’re paying that loan interest.

21:46 Dr. Ann Tsung And if the cash value is growing regardless, it sounds like even though you have the 100k in the deal, there’s going to be cash value growing above that, that you can still borrow in five years.

21:58 Blake Brogan That’s exactly right.

22:01 Dr. Ann Tsung Okay, that’s clear Got it. Awesome.

22:03 Blake Brogan Awesome. So what I wanted to do next was just put a very easy case study together, right? Again, we work with people who, various means, you can fund these policies however you want, you can choose how much you want to put in—whether it’s $25,000 a year, $50,000, $100,000. We have people putting in seven figures a year, right? So we build these up. We have clients using these for all types of investments. Brenyn mentioned a couple of those at the start. So what we did is say: okay, we’re just looking at an option that one of our partners had, which was a credit fund. Okay, if you put 100K into this, we’ll give you 12% a year until you want your capital returned. That could be 5 years, 10 years, 15 years, right? So you’re just going to put in 100K and receive $12,000 a year of cash flow. When the deal is done, you can get your 100K back, just kind of like you were talking about, Ann. And so obviously, our IRR, if we do this deal, is 12%, okay? That’s coming from the bank account—how most people do it. They had their 100K. They invested it. They got their 12%. Then at the end of the time—5, 10, or 15 years—they got their 100K back, right?

23:10 Dr. Ann Tsung Can you explain IRR to people who may not understand?

23:13 Blake Brogan Yeah, basically, internal rate of return or investment rate of return. Basically, for the dollars that I’m putting in, what type of cash flow I’m getting back. I know there’s various ways to calculate these in different investments. But basically, for every year your $100,000 was in there, we were creating $12,000 of cash flow. And so what we did here is say, okay, what if we did the exact same fund, the same credit fund, but as opposed to using our bank account to fund that deal, what if we had our cash in an investment optimizer policy? What is that going to look like? So again, the opportunity comes up. The investor wants to put 100K in. They take a policy loan, so now we get to use the insurance company’s money. We put the 100K in the investment, just like we would have otherwise, and we get the $12 ,000 a year of cash flow from that deal. As opposed to going back into our bank account with the $12,000 a year, we’re now just recycling it back into the policy to kind of pay down that policy loan and add some more funds to it, just like we kind of talked about. So we’re taking the 12K and, as opposed to bank accounts, just going right back to the policy. But while that investment opportunity was happening and you were getting the 12% there—because we never removed our money from the account, and it continued to compound—we had some additional growth in the policy. So over five years, we would have earned $8,700 in the policy. Over 10 years, $35,000. Over 15,000, $85,000. And again, that is additional value that we got on top of whatever we got in the investment as well. So as opposed to just getting the one rate of return in the investment by getting it through the policy, now we have the gain in the policy plus the investment returns as well.

24:57 Dr. Ann Tsung So it sounds like you’ve put in 100K in there. We talk about, yeah, maybe it’ll keep growing the cash value. You can borrow against it. It sounds like in five years, you can borrow 95%, almost 9K. In 10 years, you can borrow like 90%, 95% of 35K. That’s what it sounds like.

25:18 Blake Brogan Yes, and if you continue to fund the policy — most of them are set up where we’re funding on an annual basis, and you can choose how much you fund each year. Typically, we’ll fund it for 5 years, 7 years. You can fund it for 50 years, if you want. Every time you fund it, more and more is just building up the cash value.

25:36 Dr. Ann Tsung If we’re not funding at all, everything is starting from just 100K only, the gains, the growth from the policy.

25:44 Blake Brogan Yeah, there was some capital that went into it. Again, let me say, myself personally, the dollars that I’m eventually going to get into a cash filling asset, I’m trying to get into my policy first—all those dollars. So whatever I was going to save each year that are eventually going to go into alternative investments, I put it into my policy, build up the cash value. Then when I’m ready to invest—I’m utilizing the strategy—taking a loan against it to go do those investments. So I continue to fund the policies each year.

26:14 Dr. Ann Tsung Okay. The current growth from the policy, just to clarify, the 9K, 35K, 85K though, is that one-time investment of 100K, or that’s assuming your funding it per year as well in addition?

26:29 Blake Brogan Yeah, so in this case, we funded it for a couple of years and then we stopped funding. So the only additional funding that’s going in is the $12,000. That was coming off the investment.

26:39 Dr. Ann Tsung Okay. Got it. So no additional other capital. Just 100K, and then the 12K goes back. Okay.

26:44 Blake Brogan Exactly right. Yep, and the 12K was either going to go to the bank account. We’re using some of that to pay down the loan. Some of it goes back into the policy with new money, but it’s all coming from the investment. Nothing is out of pocket.

26:55 Dr. Ann Tsung Okay, all right. Got it.

26:57 Blake Brogan And then just putting some numbers to that, this fund was offering 12%. Of course, that’s what you’re going to get. But if you utilize the investment optimizer strategy as your opportunity fund before deploying the capital, we take that 12% to a 13% or 14%, 15% return In total for the total cash outlay because now we have our money grow in force in two places at once.

27:23 Dr. Ann Tsung And, you know, when you get the disbursement of the 12%, yes, you’ll pay taxes on it. But once it’s in the policy, then you’re not paying taxes on anything that’s gained.

27:32 Blake Brogan Exactly right. Of course, yeah, there’s going to be taxes with nearly every investment we’re making. What we really want to do with this is just do a complete apples-to-apples comparison. I realize it is a simplified version. The nice part is, this can work with any type of investments. We have people who would love to get 12%. We have clients who said, “I would never do a deal for 12%.” So we have people all across the board. We’re just using the same inputs and outputs for policy versus investment optimizer.

28:03 Just as kind of a quick summary, this is kind of our final slide here. The reason that this strategy is powerful is, number one, what we’ve been talking about, it’s a way to increase your investment returns using the exact same investments you would be doing anyways. It’s a place to store your capital that’s safe, liquid, guaranteed to never go down, and get some growth over the years, as we’ve talked about. The other piece to this, which we haven’t talked as much about, is turning it into a tax–free retirement cash flow stream. People love creating additional streams of retirement. Some people ask us, “Okay, we have this policy. We have all this cash value in there. Do I just have to die for someone to get value from it?” The answer is no, you can use all that cash value and turn it into a supplemental tax-free retirement income stream down the road, which is very powerful. Then life insurance is regulated on a state-by -state basis. But depending on what state you’re in, there’s great asset protection. So all of this, all the cash in here, is free from creditors of different kind. Again, that is state-by-state, but it is a great asset protection play as well. Then at the end of the day, we are talking about life insurance. So while we’re not necessarily setting these up for the death benefit, simply by utilizing the strategy, you’re going to create significant, as I mentioned, seven to eight figures of value that will be transferred to your heirs, on top of all the additional investment returns that you were able to create along the way.

29:29 Dr. Ann Tsung I think this is a good segue to why people want to start the policy for their kids. Because I started one for my baby. I think she was six months, and then the other one was two and a half maybe. I was using it in a way like maybe to borrow money against them, maybe to pay for their school, or maybe invest for them. Or, yes, eventually, I understand that I can use it as my own retirement if I wanted to. Can you just explain to people benefits of starting it for your kids when they’re little, and how they can use it for retirement or something else for their kids?

30:00 Brenyn McConnell I can jump in and go through that. There’s a lot of different ways that people use these policies for their children, a lot of cool ways. Personally, I can tell you what I’m doing. So I put $10,000 a year into a policy for my daughter. I started that when she was a month old. I mean, right as she was born, I started the policy. The idea is that, I don’t know if my daughter is going to want to go to school. I don’t know if she’s going to want to start a business. I don’t know if I’m going to want to help her with a down payment on a house. There are so many different ways that I can utilize this. And so part of it is the flexibility, right? There’s no stipulation on what I have to use that money for. I can use it for whatever and however I see fit for my children. On top of that, it’s tax-free, right? So I’m not paying taxes on the gains that I’m getting throughout the life of the policy. Then on top of that, I view it as an amazing way and—I think a lot of our clients that utilize these policies for their children view it this way—a great teaching tool for my children. So I want to help my kids understand how investments work, specifically how alternative asset investments work. So I will utilize the policy to help them see, A, how you can maximize your efficiency in the way that you flow money in and out of deals. I’m also obviously going to teach them about different kinds of deals.

31:28 So what a lot of our clients will do is set up LLCs once their kids are old enough. Once they’re mature enough to take this on, which sometimes that may not happen until they’re in their 20s. I’ve got a bunch of clients that do this for some of their teenage kids though. They’ll get together, and they’ll set up an LLC. They have this policy that they’ve set aside. It’s their policy and they say, “Hey, here’s your policy. You’ve got $30,000 sitting in here now. Let’s go ahead and take out $10,000. I’m going to put in another 40, and we’re going to do this deal together.” But a lot of them will actually have their children go do the due diligence on the deal. So they’re actually going to call the operators of the deal. So they’re going to call a Spartan investment group or a turbine capital or a next-level income, and they’re going to get on the phone with somebody who is actually going out and purchasing these large multi-family assets. They’re going to start asking them questions about, “Hey, how does this work? How does this make sense for me to make this investment? How does the cash flow work?” So it is a really cool — it’s actually a remarkable way, I think, to help get your children involved and teach them financial literacy at a very young age. And if I’m speaking from my experience, that would be way more education than I ever received when I was a teenager. And so that’s my goal. It’s to better the next generation and help them be financially literate a lot quicker. These policies give me a great tool, A, to help them do that, because I have money set aside for them to do that. And then B, it’s also a great teaching method to show them the flow of money and how to create efficiencies while you’re investing.

33:09 Dr. Ann Tsung Yeah, I agree. I didn’t know anything about this until this last year. So I’m super late.

33:17 Brenyn McConnell It’s awesome, though. Yeah, you got it though.

33:20 Dr. Ann Tsung That’s awesome. In terms of like how people take this out from their kid’s policy for retirement, can you talk a little bit more about that? And after that, how much time commitment is it to start this? Because we want to lower the friction and threshold to start. So some people might not start because they think there’s a lot of work. Anyway, go ahead.

33:37 Brenyn McConnell Yeah, go ahead, Blake.

33:38 Blake Brogan Yeah, I would say one of the nice parts about the policies when you’re talking about children, or even for yourself, is there’s just no restrictions. So like Brenyn was talking about, it just gives you all the options. The government is not telling you like a 529, “Hey, you need to use it specifically for college.” The money is just going to be in there growing, compounding tax-free every year while you also maintain liquidity over it. And again, if you fast forward all the way to retirement, you get that compound of growth over a long time. You can turn that into the tax-free income, as well as create a legacy. So I have policies of these on all my children. I already know I don’t have grandchildren, but I know the death benefits on the policies I set up for my children will eventually go to my grandchildren as well. So there is that kind of multi-generational play to it.

34:27 Then in terms of setting it up—I’ll go ahead and fast forward to this page here—at Money Insight, we try to make things as educational and really as simple as possible. So one of the things you can do, if you want to learn more, you can download this eBook. If you’re ready to meet — one of the reasons we don’t put all the numbers out there for each individual just because they’re so customized. So what we do on a call, you probably meet with Brenyn or I. We’ll just have a conversation about your situation. It could be 15 to 30 minutes. And on that call, we can grab some info from you and actually put together some numbers that we can send over to you right after the call. So if you’re just saying, “Hey, what would this look like in my situation? How would this fit into my plan,” we can have a very short call, learn a little about your situation, and then you can see the numbers for yourself. From there, we have a great team that helps through the underwriting process. We really have white glove service for our clients in terms of how to work with the insurance companies and things like that. So we are built to make that process as streamlined as possible.

35:28 Dr. Ann Tsung And so, in terms of time commitment, after the policy set up—I’m assuming gathering all the paperwork and everything—I’m just curious, how much time does it take? Is it pretty automated after it’s set up?

35:41 Blake Brogan After it’s set up, yeah, on the early part, you potentially have to go through some underwriting, fill out an application. Ann, you’ve gone through the process. That might take a couple of weeks. Once you get set up, it is super on autopilot. You can log in and point—it’s like an online bank account—check your funds. Each year as the policy anniversary is coming on, you can add more funds to the policy. If you want, I mean, it could take a couple of minutes a year, if you want to do it that way. And when you’re ready to take a policy loan, it’s just as quick as sending an email or logging into the account to take a loan. So once you get it set up, they’re very smooth. Brenyn and I would meet with you annually as well to talk through your policy, make any adjustments. So we meet with our clients at a minimum on an annual basis. We kind of hold their hand through the process for a few couple of years and then people are like, “I kind of get what’s going on here.”

36:29 Dr. Ann Tsung So if they need to take out a loan, they just contact you, and you guys do the paperwork. Then it’s in their bank account ready to go.

36:36 Blake Brogan Yeah, and to be clear about that, we never see — Like, Money Insights, we don’t work for an insurance company. We never see your funds. When you’re sending funds to the insurance company, that’s never coming to Money Insights. So what we do on the backend is just work as a basic intermediary between our clients and whatever insurance company they set the policies up with. But to your point, Ann, when you’re ready to take a loan, we have people on our staff that facilitate that full time. So you just let us know. We submit the paperwork, you click an electronic signature, we track the funds, and they’ll be in your bank account within three to five business days typically.

37:10 Dr. Ann Tsung And that’s a good segue, maybe. People want to work with fiduciary. So how are you compensated? Are you considered a fiduciary? I just wanted to make sure it’s all transparent in terms of compensation if people are thinking about this.

37:22 Blake Brogan Okay. So someone’s working with us. One thing is, you cannot buy life insurance directly from an insurance company. You can’t buy whole life insurance, or IUL, or any type of permanent insurance. So you have to work with an agent. So at the end of the day, we’re agents. The way that Money Insights is compensated is: the insurance companies pay us directly. So we never touch our client’s money, and we don’t work for a specific insurance company. So what we do on the backend is, we’re probably licensed with maybe a dozen or so high-rated mutual life insurance companies, the companies you’d feel comfortable doing business with. Then what we do on the backend is, we’re always comparing the companies against each other. So a lot of just typical life insurance agents probably wouldn’t understand the mechanics of how to optimize the cash value. That’s really where we specialize. So if you’re saying, “Hey, I want to get the most bang for my buck, for the dollars that I’m putting in here,” we just compare all the companies against each other based upon your age and health and how much you’d want to put in and come up with a customized plan. “Hey, here’s this insurance company. Here’s how they’re creating the most returns for you.” That’s how we do work. Technically, we’re not a fiduciary, but we work with a bunch of companies, compare them all. And we always go with the most optimized policies from a cash value growth standpoint.

38:40 Dr. Ann Tsung Okay, got it. Yeah, and I think I really echo what you said about the 529, which is the reason why I pulled out all my money from my 529. I paid the taxes on it, actually, and then put it all into my kids’ life insurance. That’s the reason why I’m partnering with you guys—to spread this message out to as many people as possible. Because I feel like I wish I had known about this when I was 20. Maybe that would have been amazing. I think the last question I have is: can you pull money from your existing 401(k) if you’re already done with the employer and you have full control of that 401(k), or no, it has to be like cash, or maybe people pull out cash and pay the gains on it on 529 and then put it here?

39:25 Brenyn McConnell That’s a good question. So anytime somebody — if you’re to pull money out of a 401(k) or any qualified plan, you would have to pay any necessary taxes and/or penalties on it. So it’s not like an in-service distribution. We can’t transfer it over into a pre-taxed account. So because that hasn’t been taxed yet, the taxes have to be paid. And if it’s an early distribution, the penalties would have to be paid. Most people are doing this with excess capital, maybe money that has been sitting in a brokerage account or a savings account. Or, they’re just setting side money on a monthly basis to go towards these alternative assets, and that’s what they’re flowing into these policies.

40:07 Dr. Ann Tsung You know, a lot of 401(k)s actually from the employers, say if they’re buying their first home loan, they allow like 50k of home loan. From like, say, my university allowed that 50k of loan. I used that as part of it to purchase my investment property. Can I funnel whatever I took out as a loan, funnel it through the insurance policy, then go on as capital to purchase the property?

40:34 Blake Brogan So I’d say, think about these from a taxation standpoint, very similar to a Roth IRA, where we’re funding the policy with after-tax dollars. We get all the growth is tax-free. When we access the funds, that’s tax-free. The death benefit eventually gets paid on income tax-free as well. So in your specific example, I’m not sure, were you actually taking a withdrawal? Was it a loan from a 401(k)?

40:58 Dr. Ann Tsung A loan from a 401(k), and then it has to be repaid monthly.

41:02 Blake Brogan So probably those funds would not work. Because, again, we need to be funding the policies with after-tax dollars. So we’re not getting a tax benefit on the front end. All the tax advantages come in the years to follow.

41:15 Dr. Ann Tsung Okay, copy. Okay. It might be a little bit more nuanced example.

41:19 Blake Brogan Yeah.

41:24 Dr. Ann Tsung That was back then. I don’t have that right now. But whenever I get the syndication, like whenever they exit, I’ll have more.

41:32 Blake Brogan Yes, exactly.

41:33 Dr. Ann Tsung But that’s why, for everybody here, this could be the difference. If you’re thinking about investing right now in any sort of investment that you’re planning to make, say 100K, it sounds like this could be the difference of an extra 85K or more for you after 15 years. So, depending on your situation, just go ahead—after this call—right now: moneyinsightsgroup.com/productivity. You can book the call right now. And don’t think that you’re going to remember—after this call, you’re going to book the call. I would say, within this next minute, when you’re able, book the call now. Put it on your calendar so you don’t let 100K gains potentially just slip out of your fingers.

42:18 Thank you so much everybody. If there was a one liner or takeaway that you can leave our audience, what would it be?

42:24 Blake Brogan Think about how much money you’re losing by having cash sitting in a bank account. If you factor in inflation, that money is just getting eroded. You’re getting no growth, no tax efficiency. This is really the best place to optimize where your money is sitting in between your investment deals.

42:42 Brenyn McConnell My one liner is: take action now. We hear all the time, Ann, what you’ve said. “I wish I would have known about this in my 20s.” We have people that are in their 60s that say, “I wish I would have known about this in my 50s,” right? Or people in their 50s, “I wish I would have known about this in my 40s.” So take action now, regardless of what you’ve heard about permanent life insurance. I know that there’s a lot of stuff about permanent life insurance out there that’s not necessarily positive. We, at Money Insights, are highly educational based. So there is absolutely no pressure. There’s no specific timeline that we have in mind. We are happy to educate you on exactly how these policies work, and how they could work within your strategy, within your plan of what you’re trying to accomplish. And if it’s a good fit, great. If it’s not a great fit, at least you know more about how these policies work so that if it does become a great fit in a few years, you know exactly who to call. So take action now. Again, not necessarily that you’re going to go ahead and write a policy right away. But just get informed, get educated on how they work, and we can just go from there.

43:42 Dr. Ann Tsung Awesome. Thank you. So go ahead and book the call. Figure out how much extra gains you could potentially have, or maybe this policy is not even right for you. Thank you all so much for coming on to the show, spending your time, and the audience too, for your presence, your attention, and taking charge of your financial efficiency, essentially. And of course, everything on here that we talked about, the transcript, is going to be on productivitymd.com. And just remember that everything we need is within us now. Thank you.

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