Wealthy also use permanent life insurance (whole Life Policy) as a way to build cash value, death benefit as well as borrow against the cash value. Sucks for the first few years but does really well later on in life as both cash value an death benefit compounds. 4.5% IRR, ROTH like tax benefits, death benefit plus ability to borrow at a decent rate with no scheduled payments (flexibility). Also for every dollar funded early in Paid Up addition generates about $3-$4 in death benefit which is a good way to expand legacy, and increased death benefit also has a impact on growing the dividends over time. Most policies are stored in ILIT (trust) and other assets in BDIT (Beneficiary Defective Inheritance Trust) - its a complicated trust but has a unlimited perpetuity period. This way you take out any political risks (taxes) and social risk (future generation divorces..etc).
Usually borrowed against cash value to invest in real estate, crypto and private lending. Have been getting about 5% (tax free) average in dividend but borrowing against it for investment helps juice the return. Plus in retirement makes sense to borrow cash value and let other growth assets compound and pass it on with step up basis.
Look at https://www.oshins.com/ for BDIT. They are the one that really pioneered the formation of this type of trust.
See a lot of wealthy people do this with universal life as another diversification. A lot of insurance companies have products designed specifically for the 'Buy, Borrow, Die' strategy where fees are fairly low for max funded policies and loan rates are equivalent of 0%
Take some of your wealth and roll it over into a UL product (IUL, VUL, Hybrid UL). The cash value grows over time (5-6% net fees is feasible). Switch it to DB option A when you are done funding it.
Withdraw contributions tax free. Start taking loans out and let the loan balance accrue. These policies credit the impaired loan account ~ loan APR so the net impact is 0% APR.
Depending on goals you can drain almost the entire DB tax free or target a DB to leave for heirs, again all tax free.
Illustrative numbers: Put $10mm in at 55 for $30mm Face amount. Draw $1mm of contributions for 10 years in retirement. Take another $10mm in loans at $1mm a year. Keep $10mm DB. No taxes (a bit more complicated in real life, but see a handful of these a week come in)
Insurance companies are very regulated and over capitalized. Plus the entire industry is confidence dependent. There has never been a claim not paid as regulators step in when regulatory capital gets below a certain redundancy and takes over and either fixes or sells the business.
Risk is largely around 1) current charges can be increased to guaranteed, or 2) market performance subpar.
#1 can be mitigated because if an insurer raises charges you can roll the policy over to a different insurer (so very rare occurrence as lack of trust in an insurance company = policyholder flight = negative flywheel).
for #2, there are limits to how much cash you can put into an insurance policy and have it still be considered insurance (instead of an investment/MEC). So if you put a lot of cash in right away and have a policy with negative returns that drops AV. You may not be able to put in any more cash and then charges will be a higher % than expected and drag down performance. (This is why, despite the hate on IUL, the fact you can't have negative investment returns makes them pretty decent for tax minimization)
I wouldn't say put all net worth in as Buy, Borrow, Die. But as a diversifier from RE/Investment+bank loan it can make sense.
Lastly, you can set up with trusts or with trust/charity as beneficiary. As soon as you die, auto transfer of owernship so no concern with probate/creditors/etc.
I meant to compared it with Whole Life. Whole life has guaranteed lock costs whereas IUL type policy has variable cost structure. Whole life has a guaranteed yearly growth whereas in IUL if you have a negative market return then you get 0% plus the fees. Whole life has guaranteed death benefit (which really helps spend buy borrow die as you can spend more later in life) where as in IUL rising death benefit costs will force you to manage policy later n life.
The goal with insurance is to take out as many risks as possible and therefore a mutual (owned by policy holders) whole life company makes a lot more sense - its more on conservative side. Use it to store cash while getting ton of other benefits. Your $1 is doing multiple jobs (velocity) - accumulating cash growth, death benefit, ROTH like tax features, ability to borrow with no credit check, liability protection. Also for very little cost you can add disability (they will pay all your premiums including paid up additions) and terminal illness rider.
Will add for rental properties that you have to actively manage them if you want to claim the repair costs against the rental income for taxes.
If you are not actively managing the rental yourself (700+ hours a year spent by you personally) you can only treat major repair expenses as capital expenses and claim them against the profit made from the sale of the property.
If you have hired a property manager to do things like vet and select tenants, answer tenant issues, and manage repairs then your primary tax write-offs will come from property tax, mortgage interest, management costs and depreciation.
Depreciation will do a lot of the heavy lifting here, and it is exactly as you stated where the goal is to show no income or a slight loss even if the properties are allowing you to take disbursements from the LLC you hold the property(ies) in.
Many people think that managing the property themselves to maximize their tax deductions is the smart move but the amount of time you'll actually spend is far more than 700 hours, and being at the whim of tenants is awful. Many people do not realize how to select good tenants either nor how to comp rental rates and will tank the profitability of a property by letting it sit vacant through key months because they are set on the wrong number or will either not pick up on warning signs from new tenants, or will discriminate in ways the law doesn't allow. I'd rather have a property sit vacant than have a bad tenant. But realistically, I'd rather just hold treasury bonds than rental property.
""...If I had to find that kind of money, I would have to borrow it, and then sell assets to repay the debt.”" Buy borrow die makes sense, otoh I never understood that comment from Felix Dennis, if he has to sell assets to repay the debt isn't he going to get hit with capital gains taxes anyway? Why bother borrowing?
In my country, with brick and mortar you’re able to take a professional loan to acquire the business, not with ecommerce. Since acquiring debt is potential wealth, does it still make sense to go the ecommerce path?
The internet is the easiest way to get rich with a biz, we're not even going to waste time addressing this question as it has been answered for 10 years now. If you can make a profitable ad, it is a literal money printer. Spend $10 get $11 back and you'd do that forever until every customer is found
Awesome post. As an uninitiated, does anyone have recommendations about setting up trusts? What about single-member LLC vs trusts as vehicles for 'buy, borrow die'?
Wealthy also use permanent life insurance (whole Life Policy) as a way to build cash value, death benefit as well as borrow against the cash value. Sucks for the first few years but does really well later on in life as both cash value an death benefit compounds. 4.5% IRR, ROTH like tax benefits, death benefit plus ability to borrow at a decent rate with no scheduled payments (flexibility). Also for every dollar funded early in Paid Up addition generates about $3-$4 in death benefit which is a good way to expand legacy, and increased death benefit also has a impact on growing the dividends over time. Most policies are stored in ILIT (trust) and other assets in BDIT (Beneficiary Defective Inheritance Trust) - its a complicated trust but has a unlimited perpetuity period. This way you take out any political risks (taxes) and social risk (future generation divorces..etc).
Heard about this one might have to go down this rabbit hole at the same time
Usually borrowed against cash value to invest in real estate, crypto and private lending. Have been getting about 5% (tax free) average in dividend but borrowing against it for investment helps juice the return. Plus in retirement makes sense to borrow cash value and let other growth assets compound and pass it on with step up basis.
Look at https://www.oshins.com/ for BDIT. They are the one that really pioneered the formation of this type of trust.
Will take a look thanks!
The Infinity Wealth podcast guys do a good job explaining the infinity banking concept
https://www.amazon.com/Becoming-Your-Own-Banker-Infinite/dp/B001NZO1DS/ref=asc_df_B001NZO1DS/?tag=hyprod-20&linkCode=df0&hvadid=693372870696&hvpos=&hvnetw=g&hvrand=5901243004358683335&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9027593&hvtargid=pla-624303070447&psc=1&mcid=732cb1d7d1113f178040bfc5df88d314&gad_source=1
See a lot of wealthy people do this with universal life as another diversification. A lot of insurance companies have products designed specifically for the 'Buy, Borrow, Die' strategy where fees are fairly low for max funded policies and loan rates are equivalent of 0%
Take some of your wealth and roll it over into a UL product (IUL, VUL, Hybrid UL). The cash value grows over time (5-6% net fees is feasible). Switch it to DB option A when you are done funding it.
Withdraw contributions tax free. Start taking loans out and let the loan balance accrue. These policies credit the impaired loan account ~ loan APR so the net impact is 0% APR.
Depending on goals you can drain almost the entire DB tax free or target a DB to leave for heirs, again all tax free.
Illustrative numbers: Put $10mm in at 55 for $30mm Face amount. Draw $1mm of contributions for 10 years in retirement. Take another $10mm in loans at $1mm a year. Keep $10mm DB. No taxes (a bit more complicated in real life, but see a handful of these a week come in)
That makes sense, wondering what the risk is on the universal life plan. Insurance company goes under
Insurance companies are very regulated and over capitalized. Plus the entire industry is confidence dependent. There has never been a claim not paid as regulators step in when regulatory capital gets below a certain redundancy and takes over and either fixes or sells the business.
Risk is largely around 1) current charges can be increased to guaranteed, or 2) market performance subpar.
#1 can be mitigated because if an insurer raises charges you can roll the policy over to a different insurer (so very rare occurrence as lack of trust in an insurance company = policyholder flight = negative flywheel).
for #2, there are limits to how much cash you can put into an insurance policy and have it still be considered insurance (instead of an investment/MEC). So if you put a lot of cash in right away and have a policy with negative returns that drops AV. You may not be able to put in any more cash and then charges will be a higher % than expected and drag down performance. (This is why, despite the hate on IUL, the fact you can't have negative investment returns makes them pretty decent for tax minimization)
I wouldn't say put all net worth in as Buy, Borrow, Die. But as a diversifier from RE/Investment+bank loan it can make sense.
Lastly, you can set up with trusts or with trust/charity as beneficiary. As soon as you die, auto transfer of owernship so no concern with probate/creditors/etc.
This has been my issue as well with this - even though some insurance companies have lasted since mid 19th century.
The risk is lack of guarantees and the costs are higher.
What do you mean by lack of guarantees? Thank you for the info btw
Thought its a insurance set up with the company
I meant to compared it with Whole Life. Whole life has guaranteed lock costs whereas IUL type policy has variable cost structure. Whole life has a guaranteed yearly growth whereas in IUL if you have a negative market return then you get 0% plus the fees. Whole life has guaranteed death benefit (which really helps spend buy borrow die as you can spend more later in life) where as in IUL rising death benefit costs will force you to manage policy later n life.
The goal with insurance is to take out as many risks as possible and therefore a mutual (owned by policy holders) whole life company makes a lot more sense - its more on conservative side. Use it to store cash while getting ton of other benefits. Your $1 is doing multiple jobs (velocity) - accumulating cash growth, death benefit, ROTH like tax features, ability to borrow with no credit check, liability protection. Also for very little cost you can add disability (they will pay all your premiums including paid up additions) and terminal illness rider.
You seem to be really up to date on this stuff interested in coming on and doing a guest post on this? Don't have your email just email us at
bowtiedbull at protonmail dot com
Will add for rental properties that you have to actively manage them if you want to claim the repair costs against the rental income for taxes.
If you are not actively managing the rental yourself (700+ hours a year spent by you personally) you can only treat major repair expenses as capital expenses and claim them against the profit made from the sale of the property.
If you have hired a property manager to do things like vet and select tenants, answer tenant issues, and manage repairs then your primary tax write-offs will come from property tax, mortgage interest, management costs and depreciation.
Depreciation will do a lot of the heavy lifting here, and it is exactly as you stated where the goal is to show no income or a slight loss even if the properties are allowing you to take disbursements from the LLC you hold the property(ies) in.
Many people think that managing the property themselves to maximize their tax deductions is the smart move but the amount of time you'll actually spend is far more than 700 hours, and being at the whim of tenants is awful. Many people do not realize how to select good tenants either nor how to comp rental rates and will tank the profitability of a property by letting it sit vacant through key months because they are set on the wrong number or will either not pick up on warning signs from new tenants, or will discriminate in ways the law doesn't allow. I'd rather have a property sit vacant than have a bad tenant. But realistically, I'd rather just hold treasury bonds than rental property.
Yeah we've been out of the rental game for a while as you know, just writing it up since it is an option.
We got no interest in that route anymore, too many costs
Anyone buy Balaji's tsn coin at presale today? He posted a link on X.
""...If I had to find that kind of money, I would have to borrow it, and then sell assets to repay the debt.”" Buy borrow die makes sense, otoh I never understood that comment from Felix Dennis, if he has to sell assets to repay the debt isn't he going to get hit with capital gains taxes anyway? Why bother borrowing?
The interest on the debt would be a small sale vs. selling the full position.
If you sell $100K of stocks the tax is $15-20K to pay interest. If you sell $1M the tax is $150-200K
That makes sense thank you, the way he phrased it, it seemed like he was selling assets to pay off the full debt, not just the interest.
In my country, with brick and mortar you’re able to take a professional loan to acquire the business, not with ecommerce. Since acquiring debt is potential wealth, does it still make sense to go the ecommerce path?
The internet is the easiest way to get rich with a biz, we're not even going to waste time addressing this question as it has been answered for 10 years now. If you can make a profitable ad, it is a literal money printer. Spend $10 get $11 back and you'd do that forever until every customer is found
If you need debt to make it online, best to avoid
Thank you
Awesome post. As an uninitiated, does anyone have recommendations about setting up trusts? What about single-member LLC vs trusts as vehicles for 'buy, borrow die'?
Looking forward to this bull. Planning on passing my coins to my heirs and want to know more how to use crypto to acquire debt for biz too
The coins side is easy you just hand that down unless north of $13M