[email protected]

Finding Opportunity in a Recession

Finances are cited as a worry for 87% of us. Inflation is up. Savings are down. And the talk of recession has reared its ugly head again. How do we navigate this new economic environment that we’re living in right now?

The point is, consumers are starting to feel the pinch. They’re spending less, they’re going out less, and they’re searching for better deals. Inflation is going up, meaning our buying power of our dollar isn’t going as far. So you could cut back your savings. Sure. But that’s only going to get you so far because let’s face it, incomes and the increase in our salaries oftentimes isn’t keeping up with the increase in the cost of living.

So what’s the impact? Well, once your savings is cut down, once you’ve cut back your budget as much as possible, you’re either going to have to cut back on your lifestyle and feel the pinch there, or to maintain your lifestyle, you’re forced to use credit.

Two years ago, our economy was awash in liquidity, meaning there was so much money coming from the federal government that people had access to money. They were buying houses, they were building houses, they were renovating their house. Well, the liquidity isn’t there anymore and savings is down dramatically. People have accessed their savings. So now if they want to build, if they want to renovate, they need credit. But here’s the problem. Interest rates have gone up dramatically. 

We’re being squeezed from both ends, but we still have goals to reach. We only have this one life to live. How do we make the biggest impact for our family and our community to move ourselves forward? Not to mention our own ultimate goal of retiring someday and living comfortably in our retirement?

How do you position yourself so you don’t feel this pinch? Is there actually a way? Are the rich feeling this pinch as much as the middle class?

Well, the answer is no, because the rich know the importance of having access to cash. Having a pool of cash set aside that they’re able to access without being impacted by the rising inflation rates, without being subjected to the approval of creditors, without being subjected to the lack of liquidity that comes with saving in a retirement plan or stashing money away in your home equity.

You see, one thing we’ve learned over the past 37 years is that access to capital trumps everything. When you don’t have access to money, your life sucks. And that’s where we can help you. 

I would argue that most financial stresses come from not having access to cash for what we really want or really need, because like I said, we still have these goals to reach. Maybe your child going to college, maybe you do want to renovate your house or buy a new car, or maybe your hot water heater went over the last month or two and these things need to be addressed.

So how do you build in flexibility in your plan instead of having buckets marked for your different goals? How do you accommodate all of life’s goals without feeling the pinch?

We always say it’s not what you buy, it’s how you pay for it that really matters. We’re not saying, “Hey, cut back your lifestyle. You don’t need that car. You don’t need that hot water heater.” We’re saying there may be a better way to finance your purchases in life so that you’re in control of that financing function instead of those terms being dictated by credit companies or the bank.

You see, this financial environment has really created opportunities for everybody if they step back and see exactly what’s going on. It’s more incumbent now than ever to be as efficient as possible with your money, with your cash flow, so that you can thrive through these very difficult economic times.

Earlier, we mentioned that recession has reared its ugly head over the past three recessions. 91% of all businesses and 91% of all families were affected negatively by recession. But here’s the key. 9% actually thrive, and they’re the ones that we want to emulate. They are the examples that we want to share with you, because, keep this in mind, success leaves clues, and the people who thrived during the last recessions are the people that can show us how to thrive during the coming recession.

Have you ever heard this? Buy low and sell high? What lower time is there then in the middle of a recession and in the middle of economic turmoil? That’s when it’s most important to have access to cash, to be ready to take advantage of opportunities, whether it’s an investment, a business opportunity, or real estate.

The best time to buy is when everybody else is forced to sell. That’s when the real value appears, and that’s when the opportunities are out there.

In conclusion, if you like to be in a position where you could take advantage of the economic turmoil that’s forthcoming, check out our Four Steps to Financial Freedom Webinar found right on our homepage.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Navigating Polarized Financial Opinions and Achieving Your Goals

If you haven’t noticed, the world we live in is becoming more and more polarized. There are so many conflicting opinions out there. Are we about to go into a recession or not? And what about interest rates? Are they going to keep going up or are they going to decrease again? 

Will there be continued volatility in the market or will stability return to the market? Not to mention the ultimate question, are taxes going up or down? How do we put ourselves in control of what we can control and start saving for the future, for a sure thing, regardless of what’s happening.

Because of the polarization, because of the uncertainty that comes with this polarization, one thing is certain. We still have goals. We still have milestones. And the longer we wait to address them, the more time we lose. And the fact of the matter is this the only thing we cannot afford to lose is time.

So the question remains, what moves should you be making right now to put yourself in a better financial position tomorrow? What are you going to look back and say, “Hey, I’m glad I made that financial decision. I’m glad I didn’t stay paralyzed and I’m glad I took that next step”.

The lens we look through is control. How do you remain in as much control as you can? Control of your assets, control of your cash flow, control of when you meet your goals. And when you’re in control, you’re better positioned to take advantage of anything that the economy, the government, and the world throws at you.

Again, putting yourself in a position where you could actually take advantage of all the bad news that’s out there. You could actually be in a position where you can look at that as an opportunity rather than being victimized by whatever happens outside.

You see, we believe there’s more opportunities in avoiding the losses than picking the winners. And not only that, but have you ever heard this, buy low and sell high? What better time to have full liquidity use and control of an asset than when the world is in economic turmoil? And by being prepared, you put yourself in a position where not only can you take advantage of opportunities, but you can protect yourself from whatever happens out there.

Here’s a question we ask all of our clients. Does having money that safe, liquid, and accessible when you want, no questions asked, does that take away any options in the future?

However, you have to keep in mind that the world around us is trying to gain more and more control of our cash flow. Whether it be paying off your mortgage as soon as possible, paying cash for your cars, or even saving in our retirement plan.

All of these things take your cash flow on a monthly basis and to put it out of our control. We’re transferring money from our control, our checkbook, every single month to outside creditors where we no longer have access to that money, especially without permission or a penalty.

So the answer, in our eyes, is very simple. When you view things through the lens of you being in control of your money, that makes your decisions so much easier. Because when you look and you analyze at the outcomes of each of these strategies and you see that you’re not in control of your money, don’t do it. Search, and find, areas or strategies that will continue to keep you in control of your money so that you can pivot in any direction that’s advantageous to you.

A perfect example of how someone isn’t looking at things through the lens of control is when they get hung up on interest rates. For example, when you go to the bank for a mortgage, what’s the first thing they offer? Hey, if you get a 15 year mortgage, you’ll have a lower interest rate than if you got this 30 year mortgage. But, what happens if you take that 15 year mortgage?

Well, you’re giving up a larger chunk of your monthly cash flow. And what’s the ripple effect of that? Well, if you’re putting more money toward your mortgage, you’re locking more money up in your home equity, but you’re also not able to save as much to reach your other financial goals.

You see, the money in your home equity isn’t necessary liquid, and it’s especially not liquid if you lose your job or become disabled, there’s no bank that’s going to give you a mortgage or access to that money If you don’t have a job.

So when you step back from that decision to take a 15 year mortgage because the interest rate is lower versus a 30 year mortgage, now you’re chewing up more of your cash flow. And the ripple effect is now you can’t save as much money, but more importantly, now you have less accessible money. So, if an emergency comes around or an opportunity comes around, you can’t solve the problem created by the emergency or take advantage of the opportunity that came to you. So the key is having accessible money that positions you to take advantage of all of these situations.

Let’s face it, life always happens. And when life throws a curveball at you, don’t you want to be able to hit that ball out of the park instead of being hit in the face? I for one, I have to tell you, I hate getting hit in the face. It’s not pretty. 

If you’re ready to hit that curve ball out of the park, be sure to visit our website at Tier1Capital.com. Check out our free webinar for exactly how we put this process to work for our clients.

As we always say, it’s not how much money you make. It’s how much money you keep that really matters.

Apple’s New Launch of a High-Yield Savings Account and What it could mean for You!

Have you heard that Apple recently launched a new high-yield savings account? This type of account is a great way to earn higher interest on your savings because let’s face it,
we all need a savings account to have liquid cash readily available exactly when we need it.


Hi, I’m Olivia Kirk and I’m Tim York. We’re from Tier 1 Capital, and we’re here to show you how to regain control of your money. For the best advice on controlling your cash flow, be sure to subscribe to our channel. And don’t forget to hit that bell to be notified when we upload new videos twice every single week.


So Apple recently announced a new high-yield savings account that currently is crediting 4.15% APY. This is very competitive, especially compared to other high-yield savings accounts. And you may be wondering, “What even is a high-yield savings account and how could I leverage it? My bank is paying me point nothing on my savings and they’re charging me fees every once in a while.” Well, a high-yield savings account is a type of savings account that has some restrictions. For example, they may say, “You could only withdraw a certain amount of money or a certain number of transactions each and every single month. But in return, you’ll earn a higher rate of return on your savings.” So, this is a great tool to leverage if you’re saving in a savings account and need access to money within the very short term (you might as well be earning a higher interest if you’re saving anyway).

But how does this compare to a specially designed whole life insurance policy designed for cash accumulation? One key difference between a high-yield savings account and a specially designed life
insurance policy, in the beginning, you will definitely have more cash available in the high-yield savings account than you will in the life insurance policy and that is something you must take into consideration when choosing between the two accounts. However, it’s not necessary to choose between the accounts. It can be an “and” situation. For example, I save up for my annual premiums within a high-yield savings account. You see what the whole life insurance policy if I pay on a monthly basis, the insurance company charges me a fee. However, if I save within this high-yield savings account I’m able to earn a little bit of interest as I accumulate the funds and save on the fees when I’m contributing it to the life insurance company.

Leave us a comment down below. How are you utilizing a high-yield savings account and are you using it in conjunction with the whole life insurance policy designed for cash accumulation?

We always say that every strategy you employ from a financial position has a ripple effect on everything else you’re able to do based on that choice. The decision that Olivia made to save in a high-yield savings account, to pay her annual premiums on her life insurance policy, not only gave her a higher interest rate on her cash, but also, saved on the premium that she paid the insurance company. And another thing to consider is that I have access to the money everywhere along the way. When it’s in the savings account, I’m able to access that money if I need to. And once I contribute it to my policy, I have liquidity, use, and control of that money to use as I see fit.

And keep this in mind, there are many tax benefits of having the money in the life insurance policy that you don’t get with a high-yield savings account. So, even though I’m earning a reasonable rate of return within that high-yield savings account, all of the interest I earn is taxable as income at the end of the tax year. However, once I contribute the money to the policy and pay that premium, and have it secure in my policy, that money is able to earn uninterrupted compound interest on a tax-deferred basis, which is a huge benefit. It’s taking money from forever taxable to never taxable.

Another key consideration to think about, is this interest rate and the high-yield savings account, whether it be an Apple or another high-yield savings account, is not guaranteed. You’ll notice that every month or so these interest rates have been fluctuating -going up or down or whatnot. It’s not locked in for any set amount of time. Once the money is put into the policy. I have contractual guarantees. These policies are actuarially designed to get better and better with time.

Then there’s the issue of safety. Is your money safer in a bank account or is your money safer with the life insurance company? And that brings us to the reserve requirements of financial institutions such as banks versus life insurance companies. I’m sure you’ve heard of fractional reserve lending, but what does it actually mean? You don’t know what fractional reserve lending is? Well, it’s really simple. It means that the bank only has to set aside a fraction of their liabilities to guarantee that you’ll get your money. Fractional reserve lending means that the bank only has to put away pennies to guarantee dollars. You see, they’re basing it on the idea that not everybody is going to want their money at the same time, and that works until it doesn’t. Conversely, an insurance company needs to have over a dollar of assets for every dollar of liability. Meaning if all of the claims were submitted for every single policy that the insurance company has, they would still have extra money left over. So, the issue of safety should be paramount in your decision to put money anywhere, whether it’s in a bank, in an Apple savings account, or in a life insurance policy.


If you’d like to learn more about specially designed whole life insurance policies designed for cash accumulation, check out our website at tier1capital.com to get started today. Thanks so much for being here. And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Incentivizing Key Employees

When you’re a small business owner, your people are key. But how do you keep your key people happy and keep them from going after a better offer from your competitor?

We recently came across a case where the business owner needed to retain his key employee. He came to us and he said, Hey guys, if I lose this guy, my business is going to fail because I could only go so far. I only have so much bandwidth. And so we need to come up with a way to make him want to stay. How do we incentivize this guy?

The loss of a key employee is devastating to any business, but for a small or medium sized business, it could literally mean life or death because that employee might be the only person in your geographical area who has the required skills and expertise to perform that duty.

For example, we recently had a business owner client whose key person, the plant manager, retired. His skill set was so wide and so vast and accumulated over many years, that it took three people to replace just that one employee.

On average, it could cost about 200% just to replace one key employee. Not to mention the lost time and the lost sales. So what’s the solution? How do we overcome people headhunting our key employees or them going off and looking for a better offer?

Good employees are hard to come across these days, and they’re even harder to keep in many cases. According to the U.S. Bureau of Economic Analysis, 48%, that’s almost one out of two of our employees, are either actively searching or open to the conversation of a new opportunity. That is troublesome if you’re a small business owner.

There are a few solutions that small business owners could take advantage of to incentivize key employees, but more importantly, recapture the cost of that incentivizing in the long run so that they’re not out a ton of money and they could take care of the key employee, their business, and their family.

We have seen several situations where the business put in incentivized campaigns to keep their key employees. The problem is, the employee didn’t recognize it as something that had teeth or something that would keep him from shopping his job.

So the first step when incentivizing key employees is to draw up documents that are going to protect you, as the business owner, and the employee, as the person who’s being incentivized. But also making sure that whatever plan you’re putting together is valued by the key employee. If it’s not, there’s no sense going down that path.

We recently worked with a business in Long Island, New York, and they had a key person that they wanted desperately to keep around. His job was in high demand, not only in their industry, but across the board. So the question became how can we design a plan that has such high value for this individual that he would never consider leaving that employer?

Well, we sat down with the employee and asked him what his biggest financial challenges were, and he indicated to us that he had two children that he needed to send to college. One was eight. The other one was six. He needed to make sure that he can provide them with the best education possible in his eyes, a private school, so that it would not have a significant impact on his overall finances.

So we worked with the employer to design a plan that would provide the employee with bonuses when his children were ready to go to college. And by doing that, that literally tied the employee in. But here’s the kicker. When we presented the plan to the employee, he was in tears with joy, knowing that his employer cared enough for him that he would take care of his children and send them to college.

However, when we met with the employer, we made sure that they knew that they’d be able to recapture the cost of that plan in the long run so that the business wasn’t suffering just from keeping that key employee happy.

If you’re looking to get started with this type of planning, the first step as the employer is to come to us, identify your key employees and say, “Hey, I have this guy or gal and they’re great. I want to make sure they’re taken care of and they don’t leave me.”

The second step is to sit down with the key employee and find out what is most concerning, or what is most valued by that key employee. And then, it’s just putting together the resources that the employer is going to provide and the value or what’s valued by the key employee. But for the key employee, nothing changes. They continue to come to work, excel and provide and build your business.

And by the way, if that key employee chooses to leave before they receive the benefits, they don’t get the benefits. That’s all written into the plan. This planning could seem daunting or maybe complex. However, it’s important to keep it simple. Make sure the employer is happy and the key employee is incentivized.

If you’d like to get started with this type of planning, visit our website at Tier1Capital.com to schedule your Free Strategy Session today.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Navigating the Great Resignation

Americans are quitting their jobs in record numbers, it’s called the Great Resignation. Over the past two and a half years, over 47 million people have voluntarily left the workforce. If you’re a business owner, this could be bad news.

On average, it could cost up to 200% of that employee’s salary to replace them with a new employee. Seeing these statistics can be troubling for a business owner. However, there are some ways  to help you take advantage of the great resignation so you could be in a position of control and not a position of victimization.

According to the Society for Human Resource Management, a loss of a key employee can have particularly damaging effects for small businesses. And here’s why.

The first reason is because that key employee may be the only person in your entire area who has the skill set to perform that job. Not only that, but a lot of times in a small business, they’re the only person who has that particular skill set and knowledge. Meaning the business owner may have trained them, but that key employee may have gone on and learned other things by themselves to help progress. They take things to the next level and that’s why it’s so important to retain them.

The second point is that the loss of a key employee also damages the culture and morale of the remaining employees. For example, if Bob was a really good performer and really moving the company along and Sally sees that, she may think the business isn’t going to continue to grow and prosper because Bob had so much to do with the success of the entire business.

The third reason is because there’s a smaller pool of internal employees who can perform the tasks and the duties of the lost key person.

The fourth reason is because a small business might have less resources, cash, cashflow and contacts that can be used to replace the lost key employee.

Let’s face it, employee departures cost companies time, money and other resources that many small businesses simply don’t have. With talent scarcity on the horizon, it’s going to be harder than ever for small businesses to retain that key talent within their business.

So that’s why it’s important to plan for the future, to protect those key employees and to reward them for their hard work and what they bring to your business. But there must be a delicate balance between taking care of your key employee and not giving away equity in your business.

So what are the possible solutions?

Well, one may be setting up a special retirement plan for that key employee to make sure that they’re taken care of in the future, something comparable that they might get from a larger company. But within your company’s budget. But again, let’s face it, there’s only so much cash flow to go around. How can you take care of the business, take care of your key employee, and also take care of your cash flow?

That’s where we come in. We’ve developed a process that looks at cash flow and makes it as efficient as possible. You have the same amount of cash coming in every single month. However, it’s not how much money you make, it’s how much money you keep that really matters. It’s not the products you buy with the money. It’s how you make those purchases.

How can you make your cash flow more efficient so you’re able to get $1 to perform multiple jobs? The dollar to protect the business owner, to build the company and also to retain this key employee. Getting $1 to do multiple jobs increases your efficiency. It increases your availability or accessibility to cash and also puts you in a position to weather any storms going forward.

We specialize in helping small businesses find the money to reward their key employees without sacrificing the business owners or the business’s livelihood.

You see, the money is literally hiding in plain sight. We show you how to unlock that cash flow or that cash and put you in control of it instead of a bank, an investment firm or the government.

If you’d like to learn more about this process, check out our website at Tier1Capital.com

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Planning for the Expense of a College Education

When it comes to funding college tuition for your children, sending one child to college is expensive, sending two is almost manageable, and sending three could be downright impossible.

The cost of college for your family is based on a calculation done by the government. It’s calculated using the parent’s income, the parent’s assets, the children’s income and the children’s assets. The more you make typically, the more you’re going to spend.

So when you’re sending your first child to college, it’s pretty expensive. And when you get into sending multiple children to college, it could not only be expensive, but it could also totally derail the retirement plan for the parents. 

And on top of that, we have the issue of fairness. You see, from what we’ve seen from our experience, the youngest child usually gets shortchanged. The oldest child has the most money because, let’s face it, the grandparents, the aunts and uncles, they all put money aside for the future of the first child. Not to mention they’re first in line. So they get first dibs on Mom and Dad’s cash flow.

Did you notice in the four factors you use for the FAFSA calculation? Not a single one of them had to do with the parent’s debt. So if the parents have a lot of debt, whether they be car payments, mortgages, boat payments, credit cards, that doesn’t factor it all into the formula for college aid.

But now we have the issue with each child, as we go down the ladder, there’s usually less money set aside for the younger ones, and the youngest usually has the least. 

So there are a few factors to consider here. Number one, is your child picking their college or are the parents setting guidelines on what they’re able to afford for each of the children? Number two, how much money is being set aside for each of the children, and is that sustainable throughout the life of the parents? And is that enough to get your children through college without derailing your retirement income?

A lot of times parents that we see are faced with the choice of sending their children to their dream school or funding their own retirement income. No parent should have to make that choice. 

So what’s the key? What are the keys to setting yourself up for college success to make sure your children could be successful and you could retire someday?

Well, the first is to start saving and to start saving early. Ideally, you want to be putting away 20% of your income and living within your means so that you’re able to fund college but also live comfortably. 

But let’s face it, there’s only so much cash flow to go around 20% sounds great, but how in the world can you do it when you’re struggling to get by today? And you know that somewhere down the road your children are going to want to have the opportunity to go to college. And college isn’t getting cheaper as time goes by.

Well, the key is to start where you are. Start saving what you can and start saving it on a consistent basis. And then as you progress and maybe you get a raise, you’re able to save more and more towards your goals. And that’s where we can help you. We help people identify where they’re giving up control of their money unknowingly and unnecessarily.

If you’d like to learn exactly where you’re giving up control of your money and how you could make it more efficient, check out our college page on our website, where we go through a deep dive of how we use this process for our clients.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Planning for the Unexpected

When it comes to planning for the future, there are a lot of factors to consider. How do you know what’s going to happen from day to day? One day you could have it all and the next day you could be scrambling for cash flow.

Typically when you’re a business owner, the reason why you got into business in the first place was to control your own destiny. Take your fate out of someone else’s hands and to stop being dependent on them for income, and instead go off and make it on your own and be in control of your own destiny.

However, in life and certainly in business, we know that we could plan for the future, but it doesn’t always happen the way we think it might happen. There’s an old saying: man plans and God laughs. The point is you need to build flexibility into your finances.

A lot of times in the beginning stages of business. It’s important to reinvest all your profits back into the business to get the ball rolling so the business will be able to take care of you. However, as your business ages and matures, it’s important to build flexibility into your plan and plan for life’s uncertainty. A lot of times in business there’s cyclical or chronic cashflow issues that need to be addressed.

Think of it as a three legged stool. The first leg is to make sure there’s enough cash to operate the business. The second leg is to make sure there’s enough cash to grow the business, and the third leg is to make sure there’s enough cash for you and your family, both now and in the future.

Now, if you could picture a three legged stool, you need all three legs or else you’re going to fall over. And what we have found in most business is they’re so focused on pouring all their profits back into the business, to run the business and to grow the business, they don’t take enough time to take care of themselves and their family, both now and in the future.

Think about it. What’s the point of pouring your blood, sweat and tears into the business if you don’t get to also enjoy life and provide for your family? This is why it’s important to plan for the flexibility, not only within your business, but also within your family finances.

That’s why we always build flexibility and access to cash for our business owner clients, both in the business and outside the business. So they’re able to take care of emergencies and also take advantage of opportunities, whether personal or business.

Think about it. What would happen if a piece of equipment went down, or your hot water heater went at home, or your child’s college tuition was twice as much as you expected it to be?

All of these aspects would pinch your cash flow further and could leave you feeling stuck. And the best way to make sure that there’s enough cash available both in your business and outside, is to make your money more efficient. Get one dollar to do multiple jobs, and by doing that, that positions you to take advantage of opportunities and to work through emergencies because you have access to cash.

The key is not to save in buckets. Don’t put a bucket on the side for retirement, for college, for building your business. All of your dollars need to be accessible so they’re available when you need them. Availability, without penalty and without major tax consequences, so you’re able to adapt and grow within your life.

And that’s the flexibility that we automatically build into the plans that we designed for our clients, making sure that their major needs are taken care of, but also that the plan is flexible and they have access to cash.

If you’d like to learn more about exactly how we put this process to work for our clients and how to build flexibility within your financial plan, visit our website at Tier1Capital.com.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

What is an Irrevocable Life Insurance Trust or ILIT?

When it comes to estate planning, a common tool to use is an irrevocable life insurance trust, commonly known as an ILIT. And sometimes you want to transfer a policy from one ILIT to another, and you may be wondering, how do you do that?

So when you’re using an ILIT, an irrevocable life insurance trust, the keyword there is irrevocable. And what does that mean? Well, that means basically the die is cast. Any assets in that trust have to stay in that trust until an event occurs.

But what happens if you have a life insurance policy owned by this ILIT?

Now, this is where things get a little interesting because there are only a few ways you can take money out of one trust and put it into another trust. Let’s say you have a life insurance policy with $310,000 of cash value. One of the ways that you can get that policy out of the trust is to exchange $310,000 of cash for the policy. So you’re just swapping assets, but now you can get the policy and the death benefit out of this trust and put it into the new trust. That’s all well and good, assuming you have $310,000 of assets. If you don’t have $310,000 of assets, what are your choices?

Well, real simply, you can freeze the policy and make it a paid up policy, which would probably reduce the death benefit. Now you can take whatever premiums you were putting towards that old policy in the old trust and put it into a new policy in the new trust. And then I would step back from that transaction and say, “am I making any progress?” Because, to me, it probably doesn’t make sense If you had a ten year old policy and now you’re going to take out a new policy in the new trust while you’re paying for a premium. When you’re ten years older, probably in your sixties or seventies, that premium is going to be significantly higher than the premium on the original policy. Again, what are you trying to accomplish?

These policies are actuarially designed to get better and better year after year, meaning the premiums are locked in. The cash value is growing, and the death benefit, assuming you earn dividends, is going to increase. If you were to transfer it to a new policy, or freeze it, or any of these other options, you’d be giving up a great deal of gain.

So let’s take a step back. What exactly is an ILIT? Well, an ILIT is a trust that lays out exactly what the grantor, the person designing the trust, wants to have happen to the assets that are going to fund it. It’s irrevocable, meaning it can’t be changed. It’s set in stone. So with that, the decisions that you make when you’re setting up this ILIT are important because in a sense they’re permanent. The control of the trust is in the hands of the trustee. 

But, because of the irrevocable nature of the trust, there are limitations as to even what the trustee can and cannot do. And that’s the point. Make sure you know what you want to have accomplished before you get into an irrevocable trust, because you’re limited, and your trustees are limited as to exactly what can happen down the road.

The trust is a blueprint of what can and can’t be done with the money and the funds within that trust.

Conventional Savings Account vs Life Insurance

Since that whole fiasco with the Silicon Valley Bank, a lot of our clients have been calling us and saying, “Hey, is my money safe with a life insurance company?”

One day everything is fine. The next day you have nothing. One day you think your bank is safe and now you’re facing uncertainty. When it comes to saving in the bank, we’re certainly not depositing our money for high interest yield returns. We’re putting it there for safety, for security, for liquidity use and control.

However, when something happens like adjusted with SVB, our faith and trust in the banking system gets rocked. Silicon Valley Bank became insolvent because there was a run on the bank, meaning that a lot of depositors wanted to withdraw their money because they saw that the bank was unsafe. The problem is, not everybody got their money. 

You see, in the old days when you wanted to do a run on the bank, you went to the bank, you asked the bank for money. They gave it to you. Or if there was none left, they would let you know. Nowadays, with online banking, we’re able to withdraw money and transfer it somewhere else without the bank even being open.

We’ve all seen those iconic pictures during the Great Depression of people standing in front of a bank waiting and hoping to be able to get their money before the bank ran out of money. Because of electronic banking, the ability to access your money should be quicker. However, when there’s a run on the bank, that liquidity disappears. 

So you may be wondering what safeguards do the banks have in place to make sure that you’re able to access your money?

First and foremost, the bank needs to put money in reserve to guarantee that you could get your deposit. Do you have any idea how much the bank needs to put aside in reserve to make sure that you can get your money?

Well, the answer is somewhere close to $0.10 for every dollar. What that means is if you deposit a dollar in the bank, the bank only needs to put aside $0.10 to guarantee that you’ll get your dollar. Now, they’re banking on the fact that not everybody is going to want their money at the same time. And for the most part, that holds true, except when it doesn’t.

So what happens when it doesn’t? Well, that’s where FDIC comes in. FDIC stands for the Federal Deposit Insurance Corporation. One of the first things people ask when they’re putting money with an insurance company is, “Hey, is this FDIC insured?” And my response is, “No, thank God.” And then they look at me with a puzzled, look and say, “What are you talking about?”

You see, the reason banks need FDIC insurance is to guarantee that you’ll get your money, because if there’s a run on the bank, they know they don’t have enough money set aside to make sure you’ll get your money. So they have to offload that risk to a separate company, the FDIC. What the FDIC does is they charge banks a premium that they use to create the deposit insurance fund. It’s called the DIF. And in that deposit insurance fund comes premiums from all the banks, small, medium and large. And there should be enough money in there, hopefully, to make sure that everybody will get their money.

Here’s the problem. As of December 31st, 2022, the FDIC held $128.5 billion in the deposit insurance fund. But consider this, It was backing $22 trillion of assets. That’s like a penny and a half for every dollar of deposits. Is your money really safe?

So let’s transition over to the reserve requirements of an insurance company, specifically a life insurance company, whether it’s with an annuity or life insurance. Life insurance companies have the highest reserve requirements of any financial institution. That means they have a higher reserve requirement than banks and investment firms. And consequently, your money is safer with a life insurance company than any of those other financial institutions.

You got to realize the reason the banking industry pushed for FDIC insurance during the Great Depression, when 9000 banks failed, was because people lost faith and trust in the banking system. And that’s why FDIC was created.

So how does this translate? Well, let’s take a look at a poorly run insurance company, a poorly run life insurance company would have a dollar and $0.04 of assets for every dollar of liability that they own, meaning they could pay all of their claims and still have money left over, not like an investment where your money is at risk, or a bank where there’s only a fraction of your deposit actually held by the institution. We believe that life insurance companies are a much safer place to store and build and accumulate your wealth.

And as we just learned, it’s not how much money you make. It’s how much money you keep that really matters.

Leveraging the Cash Value of Your Life Insurance Policy

So you’re a business owner, and you have a whole life insurance policy, and you want to leverage the life insurance cash value to make an investment in your business. But what happens when you want to infuse some of that wealth into a business expansion, into operations, or into a business opportunity?

Let’s assume that I own an insurance policy, and I want to take a loan for my business. The first step will be for me to request a loan from the insurance company. The insurance company will send me a check or direct deposit into my bank account, and then I could make a separate loan to my business.

With that, we’ll have a promissory note drafted up between the business and myself laying out the terms of the agreement. It’ll include the payment amount, the interest rates, and the amortization of the loan. Additionally, there’ll be an amortization schedule that’ll lay out the principal and interest payments of this loan between me and my business.

You see, it’s important to make sure that you’re following the amortization schedule because the business is going to want to deduct the interest that it pays to the loan provider (myself), for the loan that I made to my business. So the business wants to get that deduction.

But now, I have to claim that same amount of interest as interest income, and now I have to file that on my tax return as interest income. Any accountant can help with that because they’ll have the amortization schedule and hypothetically, they’ll be handling both my business and my personal tax returns.

So continuing with the logistics, every month, my business will pay me the set amount from our promissory note, and I will repay my policy loan.

You see a very key step is making sure that I make the payment back to my policy. Why? Well, number one, I wants to reduce the amount of interest I pay to the insurance company. But number two, I wants to make sure that I have money in the policy for the next opportunity, or the next emergency, or the next expansion of my business.

You see, there’s a second layer here. With the life insurance policy I’m paying premiums, and after I took the loan, I’m also infusing cash back into the policy via these loan repayments. So it’s like I have two hoses filling up the same bucket. Because I’m filling up this bucket from two hoses, the premium and the loan repayment, it’s going to get more and more efficient each and every single year. I’ll have access to more and more cash with each passing year, and that will help to take advantage of bigger opportunities down the road.

You see, the goal is to control the entire financing function in my life so I could control the financing for myself, things that I want as well as for my business. And when we talk about making sure that you’re in control or regaining control of your cash, we’re talking about your cash. We’re talking about your cash flow. And we’re talking about your future.

If you understand this concept, it’ll be easy for you to create, cultivate and keep your wealth.

And remember, it’s not how much money you make, it’s how much money you keep that really matters.