Becoming Your Own Banker | Richest Americans Are Using THIS System

So a lot of money is leaking the business today on all those things that you see on your screen today. And nothing happens to the flow of money without the function called banking. A function called banking has to be performed for the money to flow if presently all the money is flowing outwards. And the reason why that's happening is because you're familiar with the function called banking when it comes to your business, you're just not controlling it. Nelson always starts his talk and he would say everything begins with the way that you think. So a we have to start thinking, but in addition to that, we have to actually develop the ability to start thinking differently. And in all the content that we have on the YouTube called the Banker's Vault channel, on our podcast channel wealth without base rate on the books that we provide as additional resources from our website sma, the purpose behind all the content is to help people start thinking differently or help people start developing the ability to think. Because everything begins with the way that we think. Your business today earns an income called revenue. Now you may be in a business where you have to sell goods to earn that revenue, or you may be in a service business like a consultant. And as you provide your time, your good guidance to other folks that you help to serve, in exchange for that, you own revenue. So your business could be earning revenue via goods or services, or your business could also be earning revenue through passive income. Now, income comes into business. Now when it comes into business, it ends up in a business checking account in a bank. So your business has a checking account no different than how you have your own personal checking account. So when your business gets paid for the services and goes to the business else, that's where the money goes. The bank sees your business revenue before you see your business revenue. And once the money's in the business, then the business starts to use money for the purpose of paying for the things that the business needs for the purpose of team members, IT support, things like that. So business has payroll. You may own your property in the business, you may be paying mortgage, you may be paying rent. You have marketing and advertisement expenses, you got equipment financing, you may be leasing equipment, you will have accounting fees for sure. You may hire some IT consultant to run your business from computers, from servers, things like that. You will have legal fees to run your business. And there's so many other things that the business is presently spending money on. So monies come into the business, monies leave the business. Now if you add up all the things that your business is presently spending money on, so Team members, business owners, income, income, mortgage, rent, utility. You may have loan repayments, credit card debts, payment to vendors. You may have insurance premiums, tax installments, legal bills, contractor fees. And if you add up all the payments that you have today on a monthly basis, is it a lot of money that's leaving your business or is a little bit of money that's leaving your business? I know the answer is it's a lot of money. Takes a lot to get the job done. So lot of money is leaking the business today. And nothing happens to the flow of money without the function called banking. A function called banking has to be performed for the money to flow. If presently all the money is flowing outwards. And the reason why that's happening is because you're familiar with the function called banking. When it comes to your business, you're just not controlling it. So don't just be in business of owning revenue, but also be in business of controlling the banking function for the business that you presently have. So the money is retained in the business, not leaving the business. Every decision that you make with the use of your corporate dollars today is a financing decision. Meaning you either borrowed money from a bank and you use that money to buy the things that the business needs so that you can scale the business and then you have to pay the bank back interest on that loan. So because interest is involved, that's financing decision. The other way for you to buy the things that you need in a business is by paying cash that your business has, and you pay cash for the things that your business needs. Then you making a decision as a shared holder on the behalf of the business. The decision is not to earn interest. Not to earn interest is also a financing decision because once the cash is paid for the goods and services that the business needs, that money is gone forever. You can never earn any interest in that money for your business. You can never reuse that money again. It's. It's gone, it's permanently lost. So either you pay interest or you give up the opportunity to earn interest. So all day long today you are making a financing decision. You just don't know it. And it's not your fault if you don't know it. But it is certainly a problem that you need to fix. And you can fix that by becoming your own banker for the business or your business also becoming your banker in addition to what the business does. If today you have to make a plan for your business for the purpose of scaling your business, and you have to have that ladder in place, you're going to build that ladder, which is the pathway to grow your business. You can see there's three options on the screen. There's option A, option B, option C. If today you have to build a business plan, that that ladder, that roadmap, which of these options will you select to grow and scale your business? Option A, where you're running on a incoming escalator, or option B, where it's just a regular ladder and then you're moving up, but the pace that you can move up is the is based on the effort that you have to put in. The more effort you put in, the quicker you can go up. Or option three is where you build a upgoing escalator as a plan. And even if you just step on that escalator, your business will still scale because of what the escalator does. But if you actually move, if you move forward, take a step forward on the escalator, then you'll get to your goals quicker. So if we had these three options, which of these options would you select? Option A is a way to finance the things that you need in business where paying interest is involved. Because when you pay interest, that interest is not working in your favor, it's working against you. Add to the cost of running the business, which reduces your overall profitability just on the transaction. Now, option B is where you pay cash for things in your business. You're not borrowing any money, you don't have any debt, you're paying cash, so there's no interest that has a headwind. But then the only way that you can scale is based on the pace that you can actually save up money. Because if all you want to do is save up money and use your money to buy the things that you need to grow and scale your business, the pace at which you can scale and grow your business is the pace at which you can actually save money if you don't want to get into debt. And the option three is where you don't have a headwind like an option A, and you're not paying cash like option B, but you actually have a tailwind pushing ahead. Because the option C is where you're actually recapturing the interest on the things that you need to finance in your business. And that can only happen when you implement the process of becoming a banker in your business. And the only way to make that happen is by making sure that you become your own banker. Because by becoming a banker, you get to recapture the interest. So the process of becoming a banker is about recapturing the interest on the things that you're financing in your business today. Now, to implement the process of becoming a banker, there's a tool that's required. And you can see I'm using a Swiss knife as a tool because Swiss knife is a multipurpose tool. And no different than that. The tool that we're going to use to implement the process of becoming a banker so you can create that financial tailwind for yourself and the business going forward. The tool is also a versatile tool. It's customized to every individual business needs. The tool that we use is called participating dividend paying whole life insurance. The reason why we use this tool is because this is the perfect tool that has all the required attributes to recapture the interest. Remember, to create that option C effect, you have to recapture the interest. And if you recapture the interest, you're going to create a financial tailwind. So this tool has those attributes. That's why we use it. So here's some of the attributes of the tool. So the first thing is the premium. Now it is a life insurance product. Now one thing is common between all insurance products and that one thing is premium. You have to pay a premium in exchange for that insurance company to promise you the benefit. It's a promise to deliver the benefit in exchange for premium. No different than that even for a participating dividend paying whole life insurance. We're using this tool to implement the process. And the process is called becoming your own banker. So to create your own banking system so they can create that financial tailwind for your business. So you're always moving ahead financially. You have to put the money into the tool because you're creating a banking system. Now banks need deposits. Your business is presently depositing a lot of money in someone else's bank. And at the end of the year, your accountant would say, hey, here's how much money you have retained in your business. My caution is who, who is actually retaining that business? You or someone else's bank? So premium is intentional and it is what you want it to be. The more you put in, the more you have. And premium is the solution to the problem. It's not the problem. It is not about how much lease should I put in to get the most benefit out. It doesn't work like that. It should be all your retained earnings. Technically all your retained earnings should be going into the system. So capitalization with premium has to be very intentional. And when we design a system, we design it for very specific objective. The second attribute in a participating dividend paying whole life insurance, just because it's A life insurance tool there is death benefit. So corporation after tax corporate dollars is paying the premium. And all active businesses in Canada up to $500,000 in income qualifies for small business tax deduction. So after tax corporate dollars we put in this premium. And it's a policy that is owned by a business on the shareholder of the business because the business has a beneficial interest in you as a shareholder. So business is paying the premium, business is the owner of the policy and the death benefit is on the shareholder. So God forbid something happens to shareholder, you, the shareholder, you die. That death benefit is paid into the business tax free. And we'll talk about from estate planning standpoint, how it's effective for the heirs to get that money out on a tax free basis too. So that benefit is received tax free by the name beneficiary upon the death of the life insured. Financial planning will be so much easy if we know the day, the month, the year that you actually going to pass away. And then we can just work backwards to create that plan. We don't know what your best before date is. And this is where the death benefits can come into handy. It's going to be paid tax free into the corporation from the corporation is going to be extracted by your estate, by your heirs on a tax free basis also. So corporation paid the premium, not you personally after tax corporate dollars that went to the policy as a premium. The death benefit is paid in the corporation and from the corporation it's extracted tax free out. The third component, which is what we use to implement the process of becoming a banker is cash values. Cash value is the capital that is generated that accumulates in the policy. The cash value is a capital it grows on daily basis that by age 100 total cash values of the policy must equal the total death benefit. The cash value growth is tax free. And the cash value is not money. Cash value is capital. What cash value represents, it represents present value of the future death benefit. The last component is dividend. Now dividend is the divisible profit from the insurance company. And dividend that you receive inside a policy is based on contribution principle. And your contribution principle. The number one is the premium. The more capital as premium, so called deposits that you put into the policy, the more you're going to contribute to the earnings of the insurance company. Hence insurance company is going to reward you with higher dividends. It's all based on contribution principle. Dividends structured properly is tax free. So on a corporate owned policy, cash value growth is tax free. Death benefit period is Tax free, dividends structured properly, which is always how we structured it. It's going to be tax free. Now let's dive into a case study. Meet Robin and Seema. When they met with us, they had three main objectives that they want to get accomplished as business owner. Three main financial objectives. Number one was they wanted to be able to finance all the big ticket items as it related to the business. That was their number one goal now. So big ticket items, corporate expenses are always there. They also wanted to capitalize on investment opportunities, if any investment opportunities, more business acquisitions, some real estate, whatever they want to do from investment standpoint. They wanted to be able to access capital to capitalize on investment opportunities. And they wanted to create an emergency fund in case something happens. They're able to just access money and business can still keep on running with no issues at all. The other biggest concern for every business owner that we have met is ensuring retirement. The last thing is they want to do things tax efficiently. And they also wanted to create estate protection. God forbid something happened to either one of them because they have a young family. So these were the three major goals. They're consultants, so they have a service business. The total annual revenue for the business is $750,000. And they've been pretty consistent having this revenue over the last 30 years. When you look at what they take out as a owner's compensation, which is the salary and salaries of some of the team members that they have in the business, their operating expenses, their taxes, if you add up all that, it amounts to about $650,000. So out of $750,000, about 650k is used to support the business, taxes, people that are dependent on business, etc. The difference between 750 and 650 is $100,000. This is what is retained in the business every year. That money now is being retained by a commercial bank. So the question is who is retaining the money. The objective is to move as much as capital as possible from the retained earnings to start their own banking system so that we can achieve those desired financial outcomes. As you saw between Robin and Seema, Robin is more active in the business, Seema is more in the administrative position. So Robin needed more death benefit. Hence we allocated from that 100k return that they have every year $50,000 of that as premium for Robin and $20,000 per year as premium for Sema. When premium goes into policies, it creates death benefits. Now the way the policy structured is so combined premium that the business is paying on a corporate owned policy Robin and Seema respectively of life insured corporation is owning the policy. The total premium is $70,000. So 50 plus 20 is 70k. But the way the policy structured is there is flexibility in the policy premium. Only 26,000 of that 70,000 is so called the required premium. The difference between $70,000 and $26,000 is optional. It is not required, but that optional is required to capitalize the system, to capitalize the banking system. Remember, for Robin the premium is $50,000 per year and for SEMA the premium is $20,000 per year. So starting death benefit on Robin is $900,000 and starting death benefit on CEMA is $400,000. But again these are corporate owned policies. So God forbid something was to happen. The death benefit is paid into the corporation and it's extracted out of the corporation. So they have an operating company and they have revenues coming in by selling mostly the services. They have hardly any goods that they sell mostly services. The way the business is structured is so Robin and Seema, they're both directors of the operating company. They don't own the operating company. So because they're directors of the operating company, the operating company can pay them a salary for the time that they are putting in to grow the business. But operating company cannot pay them dividends because they don't own the operating company. The operating company is actually owned by their holding company. So there's a holding company on top which owns 100% of the operating company. And then money's revenues come into the operating company and then they pay themselves salary and the business that is producing the revenue is the operating company. And then Robin has 100% of Class A shares of the holding company and his wife Seema has 100% of Class D shares of the holding company. So if they want to extract any additional money outside their income that they're getting from the operating company, they can extract that as dividends from the holding company. Holding company can pay the dividends. Operating company cannot pay dividends. Revenue comes into the operating company. Operating company has expenses associated with running the business. The operating company also pays them both salaries. So you can see that. And at the end of the year, whatever is retained in the operating company, that 100k that I showed you, all that money is actually pushed tax free as a tax free dividend transfer into the holding company. So that end of the year retained earnings is tax free transferred in the holding company. So that money is now held at the holding company. There's no money sitting in the operating companies or legally all that money at the end of the year is inside their holding company, Robin and sema, the only holding company. So holding company has a beneficial interest in Robin and SEMA because the corporation is not going to work if the shareholders die. Shareholders are the one who have the vision, who are actually putting all the effort in for the holding company to at the end of the year have some retained profits saved up so the holding company can own a policy in Robin and Sema. So the policy that I talked about, the 50k premium on Robin, it's owned by his holding company. And the 20k premium in CEMA, that's also owned by the holding company. When, not if that occurs, life insurance company is going to pay that death benefit tax free into the holding company. So when Robin dies, the death benefit is paid tax free into the holding company. And then from holding company, it's extracted by CEMA tax free personally through the capital dividend account. So capital dividend account is a notional account that gets created upon the death of the shareholder and the death benefit proceeds become part of the capital dividend account and it's extracted tax free out by CEMA personally. Here's a question for you. Who paid the premium? In this case the $50,000 per year, who paid the premium? Was it Robin who paid the premium personally or was it the corporation who paid the premium corporately? Using corporate after tax dollars, the corporation paid the premium. Now at debt, who is receiving the money tax free? Spouse Seema. So you can see $50,000 for Robin. Seema has $20,000 in premium. Starting death benefit on Robin is $900,000. Starting death benefit on Seema is $400,000. Now do you like tax free on a corporate owned policy? No, corporate taxes are paid on daily cash value growth. On a corporate owned policy, the dividends structured properly. That's how we do it. There is no tax that the corporation has to pay on the dividend. The policy is not an investment, hence it is shielded from passive income tax rules. Does anybody know what the tax is on passive income? Passive income taxes are 50%. So the policy is shielded from that because the policy is not an investment. Now the death benefit is also paid tax for the corporation. If you like tax free, you're going to love the process of becoming a banker. Now here's the policy design and I'm showing everything cumulatively. So you're going to see cumulative premiums, cumulative dividends, cumulative cash values, cumulative death benefit. So the first column is the year and the age. So they're both same Age cash premiums. As you can see, 70,000 per year. Now, does the cash premium ever go up? As you can see, the cash premiums will never go up. Can the premium go down? And if you're thinking yes, the answer is yes, the premium can go down. And the only person or the only individual at the entity that can reduce the premium in this case is the corporation. And the shareholder on behalf of the corporation can make that decision. The premium can never go up, but the premium can go down. And insurance companies can force you to reduce the premium. They just can't. Because it's a participating dividend paying holder policy. These two policies are participating in divisible profits. And you can see the dividends. Now, do you see the dividends going up? The answer is yes, that's how we structured the policies. Now do you see the cash values also increasing in the policy? Every single year the cash flow is increasing. Now the last column is death benefit. What is happening in death benefit as time goes by? Because time is going to go by anyways. So as time goes by, dividends increase. Now who is responsible for dividends? Them or the insurance company? The insurance company. Now who is responsible for cash value accumulation and growth? Them or the insurance company? The insurance company. Now who is responsible for the death benefit? Them or the insurance company? Is the insurance company. The three things that the insurance company is responsible for? Three things these columns increase the only thing that they're responsible for because it's their behavior of deciding how much to put in and for how long to put in that stays the same. That's a great exchange for responsibilities. I'm going to pick very specific year. So year three now they are 42. When they started the policy. Three years from today they're 45. The question is, are they better off being 45 with the policy or without the policy? Because remember, your corporate retained money must sit somewhere. It can sit in a bank, it can sit in your wallet. Those are all warehouses of money. This is also warehouse of money. Year three comes along, they're 45, they put 70k as premium. The growth in cash value from year two to year three is 74,006. 32. And if this is you, how excited are you going to be to put that $70,000 in where the account allows you to spend $74,000 just in growth for that very year. So that's year three. And I randomly picked up another year. Year six, the day 48. Now they put another $70,000. You can see the growth from year five to year six is 87,002, 76. And I selected another year randomly. Let's just say in this case year nine, they put another $70,000. And growth from year eight to year nine is $106,000. Do you see what's happening inside the system? That's called compounding. Let's go back to the financial goals. So number one goal that they had was financing big ticket items, right? So operating expenses is a big ticket item. So year five, intentionally capitalizing the system. So they're intentionally capitalizing the system because they could have capitalized the $70,000 per year someone else's bank, they could have put all that money in someone else's bank. They just chose to think differently and then chose to put that money into this entity because they understand the money has to sit somewhere. And this is a better place to warehouse money because of the outcome that you just saw. From compounding standpoint, uninterrupted compounding for life. Year five comes along, their cash values are 357,402 and that benefit is almost $2.1 million. Now if they need to finance their complete operating expenses, they have about $750,000 per year as revenue. They're paying themselves as income, about $280,000. So 750 minus 280 is $470,000. By year five, they're able to almost finance all of a majority of their operating expenses. Now, if they need access to money for anything, there's two ways for them to access money. And both ways, insurance company is not going to object. Number one method is they can make a surrender of the death benefit so that they can withdraw their cash values. Now, if they access money be a method called withdraw of cash values, they will still be able to access money and use that money to put to work for whatever they want to use the money for. But then what will happen to the future growth of their banking system, which is this policy, Will that growth continue or will that growth stop? No different than if you withdraw money from your bank account, your account balance goes down. Same thing will happen in a system like this. If you withdraw money, money will stop to grow. If they withdraw 357,000 in year five, they're back to year one technically. Now that's one way to access it. And that's not the way that we encourage. We don't encourage anybody to withdraw money. Because if you believe in compounding, when do you want your money to stop compounding? The answer is never. You always want your money to Compound. So the way that they can access money, the second method is via policy loans. So at year five, if they need access to capital, they can borrow 90% of that cash value as a policy loan. So 90% of 357,402 is 322,661. And that's a lot of money to finance all the major expenses that the corporation has. And when you access money as a loan, in this case a policy loan, it doesn't interrupt the growth of the cash value because you're borrowing against it. The policy loan is not their money that they're accessing. The policy loan is insurance company's money, which insurance company is willing to lend them against their cash value. So all their money is inside the policy, still compounding and growing uninterrupted. So policy loan is $322,661 for accessing policy loans, it's a single page document. In fact, nowadays there's not even a document you just click on on request a loan in your portal and money will be electronically deposited in your bank account. The only thing that you have to let them know is if you want money electronically deposited in a bank account or you want the money as a check. So if they request all this money as a loan, their cash value will be used as collateral, meaning they won't be able to access $322,661 of their cash values until they repay the loan. But all the cash value is still inside the policy, growing every single day. An insurance company will put a lien on the death benefit for the loan. So in case that occurs, then they'll deduct the outstanding loan from the death benefit and the remaining is paid into the corporation tax free. So when they request that loan, money shows up and there is no lien on that money. There is lien on their future debt self for that loan. Now, outstanding policy loans do not impact daily cash value growth because we're borrowing against it. The outstanding policy loans doesn't reduce the death benefit. There's just a lien on the death benefit for a loan. It doesn't negatively impact your future dividends. It doesn't show up on any credit report of any kind that there is a loan inside a business. It's private, between your business and the insurance company. And at that, any outstanding loans gets deducted from death benefit. So insurance companies do not even dictate terms on paying back the policy loan. That is all controlled by the policy owner. So now the policy owner becomes the banker. So the first character in the financial play. So there is a play that's happening here. The four characters in the financial play are the depositor, the borrower, the banker and the bank owner. So the policy owner is a depositor because they deposit money as premium into the insurance company. Now they are the borrower because they're requesting policy loans to finance their operating expenses. But they're also the banker, which means they control the repayment terms of the policy loan. And, and they're also going to be the bank owner because policy loans is not free money, it's a loan from the insurance company. The purpose behind insurance company is a business. And purpose behind any business is to produce a profit. But insurance company mandate is to produce profit for policy owners. So they're charged interest on the loan. So when policy owners actually pays back principal and interested insurance company, that interest is profit for the business that they co own. And when business becomes profitable they get dividends. Hence the policy owner also becomes a bank owner. We take a policy loan at year five for 322,661, which is insurance company's money, not their money. Current policy loan interest rates are 6.5%. So although the interest is charged on daily basis. So basically 322,661 multiplied by 6.5% divided by 365. So the interest is calculated on a daily basis, a simple interest. But let's assume in this example that the interest was actually outstanding for a full year. Meaning they borrowed the money and they didn't pay anything back to the insurance company principal on interest for the full year. So the interest outstanding at the end of the year is $20,980. So between year five and year six, the cash value growth is $84,276. So let's just isolate the loan itself. So they took out a policy alone for $322,000. Interest is 20,980 for the year, but the growth is 84,002,76. The whole idea of creating a financial tailwind, having sitting in that escalator that's going to push you ahead no matter what is, is by creating a financial tailwind when, when you recapture the interest. So you can see in this scenario they're recapturing the interest, they're outgrowing what the cost of interest is in the growth of the policy. So if today you have to make that transaction, are you okay making the transaction where the interest is 20,980 and the growth is 84,276. Now have the interest and the things you finance work for you versus against you? Or in other words, become a banker and have the banking function work for you versus against you. Why will it be important to pay back policy loans? Do you truly know how much more capital do you need in your business as time goes by? We don't know. We don't know what's coming. But what we know is we do need a lot of capital going forward. We have a high need for use of capital. So if we just keep taking the money from a system and we keep exploiting it, meaning we just keep taking the money, but we're not being an honest banker and replenishing the money back, we are certainly not going to have money left going forward. Right? And that's upon us because that's our behavior. Insurance companies cannot force us to pay back the policy loan. So becoming your own banker is actually you truly becoming your own banker. You are in the driver's seat. Now the objective of any business is to do what is not just to earn profit but it's to stay profitable. If they just keep taking policy loans all the time and they don't replace the money back, then they're not going to meet their company vision which is to be profitable no matter what. So replenish the money on your terms so that money is back on the shelf to be reused again. And then it's policy owners behavior who's going to create a positive impact. Because the process of banking is controlled by them. Remember they are the four characters. They decide how much to deposit, they decide how much to borrow. They're the banker, they decide how to repay the loan back. And then when they repay the loan back, the interest that they're going to pay to the insurance company is going to be more profit for the business that they co own, which means more divisible dividends for everybody else. So here's the objective to insuring retirement. So they're 42 when they started the banking system. And for this example let's assume that they pay premium till age 65 and after that they stop putting the premium in. Now combined cash values between two policies at that time is $2.8 million. On day one when they had first started the policy, meaning they put that first $70,000 as premium, they had about 45,000 in cash value on day one. But in at age 65 the cash value has increased to $2.8 million. Now combined death benefit at that time is $5.5 million. The starting death benefit between two policies was about $1.3 million. So you can see the cash value has increased significantly. So has the death benefit premium paid up until this point is $1.6 million. So did they do okay setting aside monies as premium from age 42 all the way to age 65 to set aside money for the purpose of creating an insured retirement? Yes, obviously they did okay. Did they ever lose control over the money from age 42 till age 65? They never lost control of the money because all the cash value which was accumulated, they could readily access capital as a policy loan. So they never lost access to capital. How much risk did the shareholder take to ensure that the cash flow is keep increasing? Literally no risk. Now let's compare and contrast because see, everything that we do financially is a major gain for someone else is doing. Now let's look at an alternate investment. Let's say if all their objective was to set money aside for future passive income, what would an alternate investment would look like which would match what the policy did? So total premium from age 42 to age 65 is 1.6 million. So let's say they put in $70,000 every year from age 42 to age 65 in an alternate investment. Now policy cash valued 2.8 million. So to match for this alternate investment, to match what the policy did, the alternate investment had to earn them 9% per year every single year from age 42 to age 65, because alternate investments are subjected to passive income taxes. Now, here's a very important question. How much risk will the policy owner have to take to ensure that they earn 9% every year without a miss from age 42 to age 65, keeping into mind all the recession and depression that we've just experienced in the last 10 years. Is that high probability? Is it low probability? And the alternate investment will have to earn them 9% per year. And then if death occurs, how much is the death benefit in the alternate investment? Policy had about $5.5 million in death benefit in addition to 2.8 million in cash value. How much is a death benefit in alternate investment? Just the value of the account. That's basically it. So at retirement, so at age 65, they can pledge their policies also as collateral with a commercial bank. And commercial bank actually loves this policy as collateral more than what they love real estate as collateral, because commercial banks do 90% on cash values. Now, as cash values go up, because cash values will keep going up, the access to capital as a line of credit would also Increase. The corporation is going to initiate loans from the bank and from the corporation. The the shareholders at retirement are going to extract money as either dividend income or if they have shareholder loans that the corporation still owes them, they can also extract the money out tax free as a shareholder loan repayment. Now for the bank, the loss in this case is negligible because the cash value is the collateral and cash value is real capital. It's growing on daily basis. Plus there's that benefit in the policy. So in case that occurs, which it will occur, any offsetting loans and interest that the corporation owes the bank on the policies will get eliminated using death benefit. Now key points to just keep in mind that they have chosen in this case to capitalize the interest on the bank loans. They're not paying the bank back any interest, but bank will get paid at debt on principal and interest from the death benefit. Here's what retirement income looks like for both of them. So from age 65 to age 90, shareholder initiates annual loans. So from the bank $130,000 goes tax free into the corporation. And they're doing this purposely because they want to make sure that the money lasts till age 90. So they're going to initiate loans every year, $130,000. And that money is going to come tax free into the corporation. And from the corporation they're just going to pay themselves. If there's any shareholder loans that the corporation owes them, they'll extract the money tax free as shareholder loan. But the other way that the money is going to come out as just this dividend income. So the net payout to the shareholder is 75,500. And that happens from age 65 all the way till age 90. So the years of income is 25 years from age 65 to age 90. So the total money that they're able to spend on retirement is 75,500 multiple 25 years, that's $1.9 million. The premiums were 1.6 million. They're able to generate $1.9 million in retirement income from age 65 to age 90. Here's another question. Did they get to use personally more dollars or more money than what corporation paid as premium? So Corporation paid in $1.6 million, but they received personally $1.9 million. Are they okay with that? I know I won't object to that because corporation did all the work. The objective three was estate protection. So what happens when that occurs? And here's where the third objective is met, which is estate protection. Now when death Occurs two checks will come from the life insurance policy. Check number one is to pay the bank on any outstanding principal and interest that's there at age 90. Because remember they're just taking loans, they weren't paying anything back to the bank. And then check number two, whatever is remaining after that will go into the corporation tax free. And from the corporation that money is extracted tax free. We have capital dividend account. So that's basically how the money is going to flow. Now let's look at transactionally what happens for Robin and Seema. Now assuming that they both die at age 90, total loan balance with interest was 8.1 million. So 130,000 is what they took out as loans into the corporation from the bank every year. And they didn't pay the bank any principal or interest over the next 25 years. So all the principal and interest balance is $8.1 million. Now total death benefit at age 90 is 10.5 million. So as you can see, two checks will come from life insurance. One check to pay the bank 8.1 million. And the remaining will show up tax free into the corporation which is 2.3 million. And that money can be extracted by the estate or on a tax free basis. There is something called a credit to the capital dividend account which is also received and the credit received into the capital dividend account which is the account received to extract the money out at that. In this case the credit is actually not $2.3 million. That's just the remaining money that showed up in the corporation. The credit received is actually equal to the total death benefit at that time, which is 10.5 million. Which means they have available CDA credit of $8.2 million just sitting in the corporation. So if they have extra money outside of the policy, those extra money can also be now extracted tax free because there is a credit limit on capital dividend account. Are you aware of any other way to match this desired outcome with no risk? It's not at all that you're not aware of this, but you have an opportunity to implement it so that this will work for you exactly how we described it. And here's what you have to do next. You got to just text the word schedule and schedule a time with one of our authorized infinite banking practitioners on a team so you can start having discussions when your situation may be different.

Can you expand on the CD account, the capital dividend account and what that.

Is one of the amazing privileges of owning a Canadian controlled private corporation, a CCPC in Canada. If you're A Canadian citizen. When you own shares in a company.

What happens with a life insurance policy when a death benefit has occurred? That death benefit will go to the corporation, assuming it's set up properly. And that will create what's called a capital dividend amount of dollars. That death benefit will transfer roughly the same amount of the death benefit to that capital dividend account. And one of the privileges of being or having a CCPC for Canadian citizens is you can set up and build that pool of that death benefit amount to go to the capital dividend account which then can be set up to draw out of the company in the form of tax free capital dividends. Is normally to get money out of the corporate environment, you would have to use salary where you pay income taxes, CPP and ei or maybe not. Or you can take it out in traditional taxable dividends. And then when death occurs with the death benefit, a capital dividend amount will be created and that can come come out of the company tax free.

If you take a 90% loan out after your cash value is grown to a great amount, is there any tax implications? We'll be taking money in that particular case collaborates with the bank. Right. And there's no tax consequences in that case. Yeah. If they did it from their policy, I think is what they were questioning. Policies in Canada have something called adjusted cost basis. So when we surpass the adjusted cost base, anything above adjusted cost base, when we initiate a policy loan, it can trigger taxes. Let's just look at it from CRA's point of view, how they see a policy loan or what truly is a policy loan. A policy loan is literally an advance on your death benefit. You're getting to a stage now where just a cost basis, whatever the number is now, you've exceeded it and you take a policy loan and it's an advance on death benefit and you're getting more than adjusted cost basis and you're alive. So CRA steps in and says, hey, you're alive, you're getting more out and you're spending your death benefit while you're alive. Technically that anything above the adjusted cost base. So we'll tax you on that. But when you pay back the policy loans, which you can do that on your own terms, repayment of policy loans will replenish that so called debt benefit. Then you'll also get tax credits. So ultimately it becomes a wash. Now the process of becoming a banker is not a tax scheme. There's legal ways to not pay taxes as I described in this case retirement, you know Collateralizing policy with a bank and for business owners at that time, that's the best way to do that. Because to take advantage of capital dividend account. If you take policy loans and your capital dividend account calculation changes completely, hence I purposely showing bank loans in a corporation, would the policy paid be tax deductible? The premium on policy is not tax deductible because all the cash value growth, the dividends, the death benefit, all that is tax free. So you can't deduct if there's no tax consensus going forward. Is there a minimum amount or the business needs to be profitable in order to do this. I was wondering maybe if you can kind of talk about starting a second business like being in the banking business and the business that you're in. Nelson says there's two businesses that we need to be in. One business is the business that we spend time on to generate revenue for business owners. And the second business is banking. And between revenue, business, banking business, the banking business is much more critical. So here's how we determine what a good starting point is. Book that call, and that is something that we discuss. And it doesn't matter where you start. You're going to feel good about starting because it's going to work. You may start where you want to get started, but then as you use the policies to start to recapture some money that's leaving your business, then you will expand. 99% of our clients expand their program within the first year. It happens all the time. Would using a policy loan for business expenses reduce taxable income for the business?

If the loan proceeds are used to generate a taxable gain or taxable income, then generally speaking, that would be legitimately deductible. Provided that if you're accessing the loan and then you want to deduct, you know, the accumulating interest, for example, you cannot deduct something that hasn't legitimately been paid.

That expense would still be deductible, right?

That's correct. It all just depends on which source of the pool of capital you're using to pay those expenses. Do I want to use it for my family banking system where there's a growing pool of cash, or do I want to take it from my savings account or business checking account that is a dwindling pool of cash.

What should my premium be or what's the minimum premium? We don't know your situation well enough to give you good guidance on that just yet. You, you got to book that call so we can get to know you better. Make sure It's a good fit and we can give you good guidance. But ultimately, instead of thinking of, you know, how low the premium could be to start, because it sounds to me like, hey, I want to get started, maybe things are a little bit tight or what have you, rather than thinking about what I should do or how low I can start, think about what you want to do, or think about what you can do, or think about how much of your money's leaving you today and how much of that capital would you want to have flow into your own private system and working for you and your family rather than flow into somebody else's system.

Other dividend is taxable when paid from line of credit from the bank.

When the shareholder has pledged a corporate asset, the policy as collateral, the bank is extending to the corporation an operating line of credit or a term loan, and then that money's coming out into the hands of the shareholder. There are two different tracks to go down. One of those tracks is the money coming out in the form of a taxable dividend, which is taxable in the hands of the recipient, the shareholder. There is a process of the payment of a shareholder guarantee fee to the corporation, but that is a different track that a person can go down. There's some additional planning that needs to be done and to also make sure that all of the teaser crossed and the eyes are dotted to go down that route where there would not be a taxable event triggered in the hands of the shareholder, but there would be revenue earned by the corporation in the form of a shareholder guarantee fee that the shareholder would have to pay to the corporation every year based on that accumulating loan balance.

There's a number of carriers in Canada and the United States that issue dividend paying whole life policies. And the two types of life companies that issue these policies are either stock companies or mutual companies. So a stock company would be, in this case, Manulife would be one of many examples of a stock company. And when you're dealing with a stock company, you're dealing with shareholders and the stock company, their primary mandate is to be responsive to the stockholders of the company. Understandably so. That's how a stock company is organized. When there's a divisible surplus generated, that divisible surplus is distributed not only in part to the policy owners, but also to the stockholders. Think about a stockholder receiving a portion of the divisible surplus generated by the stock company. Now, if you were to add that up over a theoretical 100 year lifespan, is the stockholder getting Just a little bit of money or a lot of money?

Stockholders getting a lot of money?

Is the policy owner getting a little bit or a lot of money? A lot. When you're dealing with a mutual company, there's no stockholder there.

Yeah.

The mutual company is solely responsive to the participating policy owners. Take that out over a 100 year theoretical lifespan. Who would you rather have a 100 year relationship with?

With the mutual company, because they have my interest at, at heart. That's it.

Not only that, just take out a calculator. And it doesn't mean that a stock company is bad. That's not the distinction. Is this good or bad? The distinction is what characteristics do each one of these companies have and which resonates best with me. Is there anything stupid about doing business with a stock company? Absolutely not. But you need to understand what's going on so that you can make the best decision about what you want to do.

Some businesses obviously sit on a pot of cash, right? Some the cash flows are not kind of regular for everyone. So the question was to do with could we upload a policy with bulkier payments, initial years, and then kind of taper down to normal levels down the line?

The short answer is that a policy is designed for maximum flexibility. So in any given situation, we want to maximize that flexibility for the policy owner. And the premium has to check off two boxes. It's got to be comfortable and it's got to be affordable. If it checks off both of those boxes, you're on the right track. If it doesn't, you've got to retool. You've got to go back and say, okay, which one didn't quite get the check mark? And then understand that this is not meant to be accomplished through the device of a single policy. It's meant to be achieved through the device of a system of policies. And that system gets built over the course of time. And that's what we try to communicate and get across so that people recognize, hey, I don't have to get all of this accomplished in one policy. It's meant to be done gradually and incrementally.