Finding The Right Company For Infinite Banking

Being an adult comes with making tough decisions.

 

Tough decisions require you to elevate from between the primary choice of good and bad and into the tenacious decisions between better and best. Economic choice, such as how much more I prefer money in my pocket compared to spending my money, is a primary decision.

 

A more tenacious choice would be between the logical or emotional benefit I receive by spending my money now compared to the logical or emotional dissatisfaction when I realize I gave up the return forever when that money leaves my pocket. The idea of that lost return on the money I spend on a single and seemingly inconsequential decision may seem trivial in the moment, but those who have created wealth have long known the compound effect of the sum of the lifetime of their decisions, not just in that single moment.

 

Deciding to replace bad financial habits with wealth-creating habits is an admirable one, but it must be followed up with more great decisions to change your mindset.

 

The first time I heard my friend and fellow IBCanda Group founder Wayne Durksen say that “cash and capital are not synonymous,” I realized just how profound that statement was. Regarding your savings as a bourgeoning pool of long-term capital sets new behaviour to how you treat that savings. Instead of seeing your savings as something temporary, we regard capital as enduring and permanent. The idea of saving, growing, and protecting your capital is important enough to consider options other than a high interest savings account offered by financial institutions. Saving tax on the growth of that capital becomes a priority beyond the limitations of a Tax Free Savings Account.

 

The discovery process to find the best financial vehicle to perform the function of storing capital in Canada inexorably leads a person to realize that a properly designed, dividend-paying, participating, tax-exempt whole life insurance contract is the best way perform this function. In short, the best process of storing capital can be accomplished through the Infinite Banking Concept, using the platform of such an insurance contract.

 

That discovery process must be facilitated by certified and qualified specialists in order to get correct information to make an informed decision. Engaging the services of an Authorized Infinite Banking Concept Practitioner, who is trained and vetted by the Nelson Nash Institute, is necessary in this process of understanding the Infinite Banking Concept (IBC). To be clear, IBC should not be construed as an investment, or a real financial institution, or a gimmick. It is a tried-and-true asset that has survived every conceivable economic calamity and government interventionist scheme. Life insurance contracts predate the Income Tax Act (the Act) by more than 70 years and continues to enjoy preferential treatment in the Canadian legal and tax regime. There may be insurance agents who claim to understand the process, but without engaging with an Authorized IBC Practitioner, you’re leaving the proper policy structure and best use of the contract up to chance.

 

Chance is never an appropriate option in proper financial planning.

 

One of the decisions an Authorized Practitioner is likely to guide you through is the choice of the insurance company to place a contract with. There are only a handful of companies in Canada that offer the specific type of tax-exempt contract that is appropriate to use for the purposes of implementing IBC. Out of the four companies offering an appropriate contract, one is a mutually owned company (owned by the policyholders) and three are stock companies (shares are listed on a stock exchange). It’s important to remember that designing a policy using the right contract is the most important element IBC, there are pros and cons to deal with the unique features and benefits of each contract offered by each different company. The complex job of an Authorized Practitioner is to help easily guide you through these choices.

 

As we consider the benefits of each different type of contract, we arrive at the question whether to use a mutual insurance company or a stock insurance company. It really boils down to the type of contract offered by each of the companies instead of the differences between a mutual or stock company, which we shall explore here further. This question should be approached agnostically, and based on the details of your individual situation, including but not limited to factors such as your age and health status, the deposit amounts and duration, etc.

 

Before we can answer the question whether to use a mutual or stock insurance company, and before we look at the differences of the contracts each type of company offers, we first must understand why Nelson Nash, the creator of IBC, preferred mutual over stock companies. He did leave some clues about using stock companies, such as:

  • On page 42 of the 5th edition of Becoming Your Own Banker, Nelson states, “There are some exceptions to this requirement [using a mutual company]. There are some stock companies that have dividend-paying policies.”
  • On pages 23 and 41 of the 2nd edition of The Case for IBC, co-authors Nelson Nash, Carlos Lara, and Dr Robert Murphy write that it is preferable to use a mutual company, but not necessary.

 

It is clear that Nelson’s intent was not to be myopic or pigeon-hole a client into a specific company.

 

This makes IBC consistent with the tenets of true financial planning. That is, being guided by the facts and circumstances of each client’s situation and allowing that guide the decision instead of being a product gimmick as some incorrectly assume IBC to be. Acting in the best interests of the client was paramount to doing the right thing in Nelson’s mind. After all, if the only solution you have is a hammer, every problem becomes a nail.

 

Let’s start this analysis with some basics of a “dividend-paying, participating, tax-exempt whole life insurance contract” that can be correctly used to perform the function of IBC in Canada.

 

Cash Value

These contracts are designed to accumulate cash value, which is built from a combination of the base premiums of the contract and additional discretionary overcontributions.

 

Consider that the base premiums of a whole life contract work similar to a mortgage, where payments are a blend of principal and interest. In an insurance contract, base premium deposits are a blend of cash surrender value and the costs of setting up the insurance contract.

 

Every single premium made essentially attributes a developing equity position in the contract. Additional overcontributions go straight to cash surrender value without the drag of insurance contract costs but are reasonably limited by Act.

 

Cash surrender value in a properly designed insurance contract has a high collateral value, which is a basic feature of IBC. Working with an Authorized Practitioner will help you determine the best way to leverage against the cash values of these policies.

 

Policies are Tax-Exempt

As insurance contracts were made available in Canada 70 years prior to the Temporary War Measures and Income Tax Act, they have preferential tax treatment as described in Section 148 of the Act. The status of contracts being “tax-exempt” make insurance the preferred asset class to perform the function of IBC. This status includes the tax-exempt, predictable compounding returns of the policy (as far as the returns remain in the contract), plus the correctly structured tax-exempt credit facilities, plus the total tax-exempt distributions on the death of the insured person. The Act clearly defines the calculation of the overcontribution limit, which is unique to every policy and can be significant with the proper design.

 

Anything considered a withdrawal from a policy may give rise to a tax consequence. Therefore, an abundance of cautionary planning should be made before making any kind of withdrawal to ensure surprises are left to birthday parties and not during a call from your accountant.

 

Dividends

As the cash surrender value accumulates in the policy, it attracts a return that is described as “dividends.” To be clear, these are not true “dividends” as defined in subsection 89 (1) of the Act, but are considered a refund of premiums to the contract, and are therefore tax-exempt as they remain in the contract as described in Section 148 of the Act. They are the investment experience of the insurance company as they manage the funds in the participating account, referred to as the “Participating Pool” or “Participating Block.” The dividend calculation includes the experience from the investment activities, the mortality costs, expenses, and lapse rates. These are best described as a surplus on the investment experience of the insurance company on its participating block. The net or “divisible” surplus is then distributed to the policyholders.

 

It's important to recognize that the calculations on the returns for the participating policies are the same regardless of if the company is a mutual or stock company. There is no enhancement to the participating block from the general operations of the insurance company.

 

Dean Erickson, Individual Life Sales Vice President of Equitable Life of Canada, suggests:

“As for the question surrounding the other divisions of the company and the benefit to the participating account, it has value but no direct calculation.  Participating Dividends for all companies include mortality, expenses, lapse rates and interest earned on the participating portfolio. There is a benefit to the company and all divisions being run well, but other divisions do not contribute to the participating calculation.”

 

In essence, the block with both a stock company and a mutual company is an insulated entity, protected from the misfortunes to the other business an insurance company does. Obviously, this would be a concern to those who recall the calamity of the 2008 financial crisis, but the returns of the participating blocks in every company during that time were stable and basically unchanged over that period despite major financial institutions suffering tremendous losses.

 

Knowing that your capital will be there when you need it is a crucial ingredient to IBC. These contracts also include guarantees on the capital you have inside the contract.

 

Paid-up Additions

The preferred method of receiving these dividends in the case with IBC is to purchase “paid-up additions” (PUA). Those familiar with Becoming Your Own Banker would remember that Nelson referred to PUA as a rider to the base contract. In Canada, PUA is attached to the contract as a base feature and is the standard method to receive dividends. In this manner, cash surrender value of the policy is able to grow exponentially as compared to other ways to determine the payment of the dividend.

 

Term Riders

In our look under the hood on these insurance contracts, another option of policy design is the use of term insurance riders on the contract. A rider is an addition to the policy that usually adds a benefit of some kind in consideration of a premium. A term rider can be used in moderation to increase the total death benefit, which can increase the cash deposits in the contract. This has only been made available in Canada recently but is as described in the 2nd edition on page 76 of The Case for IBC, and as allowed in Canada under Regulation 310 of the Act. Due care and caution should be exercised by both the advisor and the client to ensure that these term riders are reasonable to the overall death benefit of the contract, lest CRA determine that the policy should be described as a term contract and not a whole life contract, resulting in the fatal application of a deemed disposition under the General Anti-Avoidance Rules (GAAR).

 

Participating

The main difference in the distribution of dividends between a mutual or stock company lies in the involvement of the shareholders, and the overall differences in the management of the companies.

 

One might logically construe that a private company is going to make management decisions based on a longer term compared to the quarterly stock performance, but such comparisons while logical, remain anecdotal.

 

It is correct that a portion of the profit surplus calculated for the participating block in a stock company may be paid to shareholders. They are legislatively limited to 2.5% of the overall policy dividends with the remaining paid to the participating block. In some cases, stock insurance companies can require the participating block to make a “permanent contribution to surplus” which is retained by the participating fund forever. This contribution comes off the top of the dividend first, and then is split within the legislative guidelines. Not all stock companies calculate the permanent contribution, and not all companies offer shareholders a stake in the participating block, so it’s even more crucial that one deals with a Canadian Authorized IBC Practitioner to fully answer such relevant details, as policy design can avoid these consequences.

 

So, if mutual companies don’t calculate the profit from the other lines of business, what does the word participating really mean?

 

Participating policies do not participate in the overall operations of the insurance company regardless of their ownership structure. It is limited to participation in the profitability of the block of policies. That is, if the insurance company benefits from lower mortality within the participating block of policies, that increases the investment experience, hence an increase to the surplus, and an increase to the dividend received. In their book Paycheques and Playcheques, authors Tom Hegna, Steve Tate, and Rob Gawthrop refer to this unique asset class as “mortality credits.” Participating whole life insurance contracts are the only vehicle to provide Canadians the opportunity to participate in this asset class.

 

With the possession of such facts, we can now more aptly review the competitive market of the mutual and stock insurance companies and make some qualitative decisions.

 

Many Authorized Practitioners favour mutual insurance companies and refer to page 80 of Nelson’s book Building Your Warehouse of Wealth, where he states, “mutual companies giving you a share of the entire profits of the company via dividends.” His primary reasoning was based in the American laws governing insurance companies, and specifically, the ability for mutual companies to share a portion of their surplus with their owners, the policyholders. As mentioned previously, the total surplus of an insurance company includes an amount set aside for future contingencies and other expense factors, and the remaining amount is called the “divisible surplus” that is divided between the participating policies in the form of a dividend. By law, American insurance companies must distribute at least a portion of the total surplus back to the policyholders as a divisible surplus, and also do so to compete in the market.

 

In Canada, mutual insurance companies isolate their surplus from their other products as equity on their financial statements and invest back into their growth. On the very rare occasion, mutual companies can elect to make a special dividend, which has happened twice in the last 100 years in the case of Equitable Life. Otherwise, ownership rights are not tradeable, exchangeable, or have any other intrinsic benefits and expire when the underlying policies terminate. In the event the mutual company decides to become a public company, that built up equity transfers into shareholder equity as happened in the late 1990’s when most insurance companies took the opportunity to go public.

 

Stephen Krupitz, FSA, FCIA, AVP Advanced Sales and Actuarial Consultant at Manulife Financial, comments on page 40 of the 10th edition of the Canadian Taxation of Life Insurance that:

“If the insurance company is a mutual company, it’s participating policyholders are nominally the owners of the company although such ownership is primarily academic in nature as the ownership rights are not fungible unless that company demutualizes.”

 

The largest remaining mutual company in Canada, Equitable Life, has repeatedly suggested that they are not considering demutualizing now or in the future.

 

I won’t take concrete position on whether it is nobler to place the insurance contract with a mutual or stock company in Canada. Like any good Certified Financial Planner, I will take the position of “it depends.” That means that the subjective facts of the client’s situation trump any noble position, and a fiduciary responsibility can be allowed to emerge over any personal preferences the Authorized Practitioner may have. Both stock companies and mutual companies offer unique benefits depending on the client’s situation, which may include factors such as insurability, amounts and durations of deposits, flexibility on making additional deposits, and many others. Despite any preference to use mutual company, it is not always feasible to do so in the Canadian story of IBC compared to the US story of IBC, especially given the short bench of companies in the Canadian marketplace.

 

At the end of the day, both mutual and stock companies can offer value to the functionality of IBC in deep and meaningful ways. There is no clear winner here and the decision really lands on two factors:

  • Your unique situation
  • The ability for your Authorized Practitioner to design a contract with the maximum flexibility that reflects your unique situation

 

The choice between a mutual company and a stock company is really a combination of the hard logical facts and soft emotional facts as you engage with someone facilitate your journey to create, grow and protect your capital.

 

When considering IBC in your own life, I would advise that you use an Authorized IBC Practitioner to guide you on that journey. The Infinite Banking Canada Group is not the only home to Canadian Practitioners but is the largest independent group of Authorized IBC practitioners in the country. To find an Authorized IBC Practitioner that works with the IBCanada Group, please visit www.ibcanadagroup.ca, or visit the Nelson Nash Institute - the centre for Infinite Banking Concept in North America - at https://infinitebanking.org


Why Real Estate Investors Need Infinite Banking Policies

Income properties and real estate are a very attractive source of income and wealth creation in many retirement plans. Countless Canadians intend to rely on the income and appreciation in a significant form in retirement.

However, we are well aware that things don’t always go as plan and we use Infinite Banking policies as a way to help client grow their real estate holdings, AND significantly reduce risk within their financial plans.

What can possibly go wrong with real estate? Well. A lot over a 20-to-30-year retirement period.

  1. You are almost guaranteed to own real estate during a major market pull back when you invest through a 20-to-30-year retirement period. If your plan was to sell or refinance a property at a certain point to fund a few years of income, you may be forced to sell at a really bad time if you're without a back up plan.
  2. What if tax rates or capital gains tax rates increase significantly, seriously lowering your after-tax profit?
  3. The death, job loss or retirement of a mortgage qualifier can easily reduce or limit your ability to pull equity out through a refinance.
  4. Similarly a change in refinance rules, eg) moving from a minimum equity of 35% from 20%, can really affect your plan to access the capital without having to sell.
  5. It is often said that having a non-paying tenant and going through an eviction process is a matter of when, not if. The process typically takes over a year with no hope of recovering the income and legal fee loss.

 

When you depend on this income in retirement, would it make sense to have a back up plan?

 

So, What’s The Solution?

The solution is to protect your assets. That is, the source of your retirement income. And wealth insurance is the perfect answer to this problem. In retirement, cash values within the insurance policy can provide several years of tax-advantaged income.

You will be in retirement, if all goes well, for 20 to 30 years. There will be problems. It's comforting to know you have a safe and secure source of tax-advantaged income that you can access to wait out the storm. With Infinite Banking policies you are not forced to sell assets at a bad time to provide your required income.

In fact, it gets even better. You can access the cash values much earlier than retirement to continue to grow your real estate portfolio during your wealth building years. Many of our clients have purchased properties by accessing the cash values in their policies for down payments.

 

Additional Benefits of Cash Value Insurance

The obvious one is you have the insurance coverage that you want, and need should you die prematurely.

But wealth insurance also protects you if you live an exceptionally long life, as the tax-advantaged growth grows exponentially over time. Having the insurance policy allows you to create an income from other assets knowing the value is replaced in the later years of the policy.

 

Contact an Authorized IBC Practitioner today to learn how to build a better wealth plan with an Infinite Banking insurance policy.


Why Use Whole Life Insurance for Infinite Banking?

Let me start by saying there are two types of people who buy life insurance: Those who need it, and those who use it.

Those who need life insurance may view it as a annoying monthly expense but recognize that it is needed to protect their family from financial hardship if they die prematurely. It gives them, and their loved ones, peace of mind knowing that their monthly expenses will be taken care of. This type of life insurance is aptly named Term Insurance since it will eventually terminate – almost always before the owner dies.

Those who use life insurance also need it for family protection, however, they understand that nothing works better for creating, enhancing, controlling, and preserving wealth. They understand that no other product can do what life insurance can do when structured properly. This type of life insurance is appropriately named Dividend Paying Whole Life Insurance. It will not terminate before you do… unless you terminate it. But why would you when there are so many living benefits?

When structured properly, these living benefits include:

  • Competitive Returns
  • Tax Advantaged Growth
  • Allows for High Contributions
  • Policy Loans
  • Uninterrupted Growth
  • Unstructured Loan Repayments
  • Collateral Opportunities
  • Safe
  • No-Loss Provision
  • Creditor Protection
  • Liquidity, Use and Control
  • Assignment as an Insured Retirement Program
  • Ever-Increasing Tax-Free Permanent Death Benefit

What Would You Bet On: 1% or 100%?

Insurance industry studies have shown that the probability of filing a death benefit claim under a term insurance policy is unlikely. One study placed the percentage as low as 1% of policies paying a benefit.

Would you rather pay money for something that pays out 1% of the time, or pay money for something that pays out 100% of the time?

Renting vs Owning?

Owning term insurance is like renting a house.

  • You pay the landlord rent every month for a month’s worth of living space
  • You may do this for many years, but while you are never building wealth for yourself, you are building wealth for the landlord who is putting your payments toward the equity he or she has in it
  • You have no collateral

Owning whole life insurance is like buying a house. With each payment you are gaining equity in the property. Instead of paying rent every month where you will never see that money again, you are taking money from one pocket and putting it into another pocket.

  • You own a living space (you have a death benefit) for the rest of your life which you wanted
  • Your monthly payment is building an ever-growing asset for you… not for the landlord (your cash value is building daily)
  • You can use the equity in your house as collateral (you can borrow against the cash value for financing) to buy a second property or make an investment or a purchase. Both your house and your cash value will keep increasing in value while using it for these purposes, even though you are using the money for something else

How to USE Dividend Paying Whole Life Insurance for Infinite Banking

  1. Take a policy loan against your cash value
  2. Use that money for something else
  3. Set it up where you pay all the principal back so you can use it again!

Please note:

  • All the interest goes to the insurance company
  • All the principal goes to you, AND they pay you a dividend

So, you have received the benefits of what you’ve used that money for now (it will be paid off when you die if you don’t pay it off beforehand).

  • So, you’ve moved from a middleclass mindset, ‘I drained my account for a purchase’,
  • And you’ve moved to a wealth-class mindset, ‘How can I make that purchase AND get all my money back?’

You have made the switch from giving up your money to NOT giving up your money for anything, ever!

That’s what banks do, and what we can do. When we don’t it feels like we are stealing from ourselves.

 


Advantages of Whole Life and the Infinite Banking Concept

Go ahead … fall in love!

There is a saying when it comes to investments, don’t fall in love with them. Just because a particular stock has done right by you in the past, does not necessarily mean it should be a permanent relationship.

However, when it comes to the Infinite Banking Concept … I gotta say, I'm quite smitten. And as for Whole Life Permanent Cash Value Insurance … It’s a forever love story.  Literally a “to death do us part.”

And while not officially an investment, this strategy helps your financial life in so many ways. Here are just some of the Advantages of Whole Life and the Infinite Banking Concept.

 

Advantages For Today

  • Reduced Taxes – Using the Infinite Banking Concept I am building up often tax-free access to cash values through policy or collateral loans. Others who save in RRSPs or Pension plans have taxable assets that are at the mercy of taxation rates at the time of withdrawals. RSPs do not avoid tax … they only postpone them.   But they also postpone the tax calculation. And I know governments are in trouble and increasing tax rates are a real risk for RSP investors. I have the advantage of having less income coming from taxable sources.

 

  • Inflation Protection – Along with increasing tax rates, governments are printing money devaluing our dollar and its purchasing power. I borrow against my policy using the Infinite Banking Concept to invest in real assets. In addition, with the guaranteed growth of cash values and death benefit, my policy offers solid inflation protection.

 

  • Safe Money for Capital Opportunities – GICs and bonds are safe money sure. But currently earning less than 2% and often taxable. And don’t forget this rate is significantly less than the rate of inflation, so you are actually falling behind. Based on average life expectancy, the death benefit typically earns the equivalent to a taxable 6 – 8%.  But I earn much more as I have used the policy to purchase investment properties and invest in stocks at opportune times. It’s a flexible source of capital that I have a contractual right to access through policy loans – no application – no credit check.

 

  • Truly the “And Asset” - Are there assets out there that will outperform Whole Life? Yes, there are. But with a well-designed Infinite Banking Policy you don’t have to choose. You can do both through accessing the guaranteed cash values.

 

Advantages In Retirement

  • Paydown Versus Interest Only – In retirement I can live off the capital and the interest of my assets. I know that if I live beyond life expectancy, my capital will be replaced by the growing and guaranteed cash values in my policy. Those without Whole Life will have to live on much less – perhaps the interest only proportions of their investments.

 

  • Reduced Pressure on Assets – I don’t need to save nearly as much as those who do not have Cash Value Whole Life Insurance – and therefore do not need to take on the same investment risk. This is because I can create a much greater income stream from the same wealth compared to those without a Whole Life Policy.

 

  • Less Worry About Investment Fluctuation – In retirement when the market has a pull back … I don’t have to worry … as I can rely on my guaranteed cash values in my Infinite Banking Policy. Others will have to adjust their income down significantly or run the risk of running out of money as the same income will encroach on a larger percentage of wealth in a down market. I can wait for things to rebound.

 

Advantages At Death

  • Although I don’t have to die to benefit from my Whole Life Policy, on death it provides a tax-free benefit to heirs which can be used to offset capital gains taxes and help beneficiaries to keep assets like rental or cottage properties.

 

Are you ready to fall in love with your financial plan?


Buy Term Insurance & Invest The Difference Or Buy Whole Life?

The answer is it depends.

Let’s start with a simple explanation of each type.

Term (T) life insurance is like renting a house.  Whole Life (WL) is like owning a house.

The initial premium for T is small compared to WL. How much smaller depends on how long you want to be covered.  T is generally available for terms of 5 years up to age 85, sometimes age 100. The most common terms are 10 and 20 years.

WL premiums are based on providing coverage for as long as you live which may be to age 100 or longer.

So, you don’t need to be a rocket scientist to see that a T10 (10-year term) or T20 (20-year term) premium is going to significantly lower initially than WL.

Most T is guaranteed renewable at the end of term to a T1 (1-year term) or the same term as the initial coverage without medical info until usually age 70. Most T is also convertible without medical evidence to WL.

If you want coverage for as long as you live, WL will require lower cumulative premiums over your lifetime than will T.

Now let’s turn to the concept of buy term and invest the difference.

In my 38+ years experience it is rare for anyone to invest the difference.  Many may start out doing so but life happens, and the difference is absorbed elsewhere.

Then there are the non-financial considerations like tax, access and control.

In order to make investing the difference optimal, you will want to invest it tax effectively.  Most will turn to a RRSP (registered retirement savings plan) inside a mutual fund that provides a tax deduction and tax deferred growth.

The problems with a RRSP is if you need access to the money.

Most will allow you the ability to redeem but subject to income tax. Investing in a RRSP also means you forfeit control which means volatility and possible losses.  It also means you must start to redeem your RRSP currently at age 71.  Redemptions mean you lose compound interest and are unable to recontribute unless you have contribution room remaining.   Current contribution room is 20% of your annual earned income less any pension adjustment (PA).

Another investment option is a TFSA (tax free savings account). It is available for individuals age 18 and over.  Carry forward of unused contributions are available.  Past annual contributions have varied with current annual contributions being $6,000 subject to change.  There are no current rules requiring you to redeem at an age. All growth is tax-free. When and if you redeem, all earnings are tax free.  But as with the RRSP redemptions mean you lost the compound interest.  While you can recontribute what you withdraw the following taxation year, the compound interest you missed out on is lost.  Again, commonly, life happens and most never stick with investing the difference.

Many miss that WL provides lifetime compound interest, control (no redemption rules), access to your money via guaranteed loans to deploy for other opportunities with no credit checks.  Many well-known wealthy individuals and businesses acquire WL and use effectively in something called the Infinite Banking Concept, also known as Becoming Your Own Banker.

WL can be viewed as buying term and investing the difference in a tax-exempt growth mutual fund that always receives an annual dividend. This means your investment is guaranteed to increase every year.  A look at mutual fund performance will show that is not the case.

Good life insurance agents will recommend if cash flow is limited that you obtain enough T insurance to provide security for your loved ones if not adequate to obtain WL.

If cash flow is available, WL is one of the most unique, versatile, under-discussed, products in the financial marketplace you will find.

One of our clients after 20-years has accumulated $1.7M in cash value in his WL policies and was very pleased to learn it performed as well as his mutual funds.


What Is IBC and Why Should I Use It?

What is IBC?

It is the Infinite Banking Concept that was pioneered by R Nelson Nash.  It is a process that uses the product of a properly structured Participating Whole Life Insurance policy. Done right, it is a lifetime tool than can and should be used repeatedly and then will have a tax-free death benefit when you eventually pass away.

The problem is we have our dollars come in and most of them leave fairly quickly.  For most people, over 90% walks out the door in the way of taxes, lifestyle and debt.  For those fortunate enough to retain up to 10%, we try to figure out how to maximize that to take us to the end of life and hopefully take care of our beneficiaries.

When we study wealthy families, we see that they maintain control of a higher percentage of their income than the masses.  It is a matter of purposeful living and not luck.

We are the Infinite Banking Canada Group and we have a mission to show Canadians a better way.  We are collaborators across Canada who have qualified for the Authorized Infinite Banking designation that is issued by the Nelson Nash Institute.  At the time of this article, there are less than 50 of us Canada wide. This group is dedicated to maintaining the standards of the founder R. Nelson Nash who discovered and practiced the Infinite Banking Concept.  We have all gone through a course of study and been mentored in how to show Canadians a better way to be more efficient and maintain control of their finances.

Why Should I Use It?

The concept is that you will capitalize (build up) contributions in a properly structured policy that will generate cash values that are accessible to you, the owner.  As Nelson said, “your money has to reside somewhere”, so having it deposited in this type of structure (where you the owner determines the access) will give you many advantages going forward.  Unlike traditional financial advice, we teach you how to grow, control and protect your dollars in a tax exempt environment.

How so?  We mentioned capitalizing.  Like any banking system, it needs to be built up by deposits.

Unlike traditional vehicles such as the RRSP, your money is not in jail.  What do I mean?

I have a set of 40-year old twins who I interviewed.  During the process, I discovered Bob was a good client match but Bart was not.  They both worked as lawyers at the same firm.  Bob and I went through our process and determined that Infinite Banking was a great match for him so we got him started on his journey.  Bart went with a traditional advisor and decided he wanted to make $25000 RRSP contributions. Bob deposited $25000 in his plan with me.

Bob starts out with an initial death benefit of $750,000 while Bart starts out with a $25,000 taxable deposit.  If they passed away early, there was a significant difference for each family left behind.

Bob is building his system steadily and his access to cash values as well as death benefits increase each years.  Bart averages 10%/yr for 5 years accumulating $208,153.  He tells Bob he’s being dumb by “investing in insurance” and he should come and see Bart’s advisor instead. Bob tells him he’s happy with his choice.  A recession hits in year 6 and the economy and stock markets contract rapidly (a 25% drop).  The law firm has a drastic drop in business and billable hours are severely cut.

Most folks are panicking (including Bart).  His RRSP is now worth $156,000 and he finds himself in need of $50,000.  His house foundation has cracked and needs to be repaired along with having to pay off his Christmas trip he charged to his credit card.  He’s been enjoying life and has his $40,000 line of credit maxed out so he’s got very limited options.

He realizes that to get $50,000 in his hands, he will need to withdraw $65,000.  To make matters worse, that will be added to his income come tax time and he may owe another 17%  (approx. $11,000 more in taxes).  The timing is terrible as he’s down 25% on his investments and doing so will lock in the losses.

He is so stressed out that he asks Bob if they can hang out and chat.

He asks Bob why he’s so calm and Bob explains that his cash values keep on growing every day.  In fact, he just accessed $100,000 against his cash values to take advantage of a few opportunities.  Bob told Bart that he bought some great quality stocks at a deep discount with $25,000.  He used another $25,000 as a loan and took a secured position on a person’s mortgage who had lost his job and was in danger of losing his home. He set that up at 15% which was a deal that the person jumped at, considering his other option was a 25% loan.

Bob let Bart know he bought into a business that was in a cash crunch at a huge discount.  The business had good sales but the recession hit the cash flow hard. He invested $50,000 and got a stake in ownership (more than double what he could have even 1 year earlier).

He let Bart know that there was no taxation on his access and that he didn’t even have to worry about payments for the next little bit.  The loan was completely unstructured.  Loan payments and the timing of those were completely up to Bob.  Bart couldn’t believe his ears.  He thought he had done the right things and he just took a massive hit to stay afloat. Conversely, Bob was able to access cash, make investments and get noticeably ahead.

Bart asked Bob to reintroduce him to me.  He wanted to experience this stress free way of life that has Bob thriving and he felt his way was a huge letdown.  We agreed to meet.  I let Bart know this is a process that requires his commitment and he agreed.  I would work with him if he agreed to my coaching which included some reading and videos to get a baseline of this process.

Most important was that Bob didn’t have to touch the asset so it continued to grow uninterrupted and without taxation.  What was Bob’s rate of return in the policy?  It doesn’t matter.  I understand that this is hard for most people to grasp as we’ve been sold this way of thinking for a long time.  I can say that it was less than Bart’s average rate of return.   Did that matter?  No.  It was the right vehicle and continues to be so by having uninterrupted compounding for life.

You have a chassis that will grow over time and you determine access.  This is done by a combination of deposits and dividends.  This increases the face amounts and as a direct result…the cash values.  You are contractually guaranteed access to available cash when you want to without having to qualify.  As your policy system builds, you choose how and when to access the funds.

We set these up with Canadians every week.

Do you want a stress free way of life?

Do you want access to cash without having to interrupt the growth of your asset?  Do you want tax-advantaged access for opportunities or emergencies while controlling payment amounts, frequency etc.?  Do you too want to become your own banker?  Do you want intergenerational wealth?

Contact us and we can help you get started on a stress free, way of life.  We can help you to be part of the IBCanada Group family.  We can help you start to build an Infinite Asset that will take care of you for life and those who come after you.