The Family Banking System That Runs for 100 Years | Infinite Banking

How do I prepare the next generation to continue the family banking system?

If you're not having those conversations, then all you're doing is you're setting up the following generations for failure.

If all that we did was leave behind money for our children, then we strip all those other values away from them. The money transfers, but it doesn't just get squandered.

These conversations have to happen because Intergenerational wealth is nothing without those values.

Um, when I think of conversations that I've heard going into my 19th year in this journey, some of the conversations that I hear generally around life insurance and what happens when there's a benefit that's paid, a death benefit, and for most people, their general awareness is that Okay. When the life insured passes away, there's a windfall, a death benefit that's paid, and then the surviving family immediately puts that money to work to pay off debt. Primarily, that's typically the first thing that happens. And when we introduce the Family Banking System, when we introduce the implementation of the Infinite Banking Concept, and families start asking, how do I prepare the next generation to carry on, to continue implementing this concept, to continue the family banking system. And if you think of, if you have a prized possession, something that is just treasured, it's a family heirloom, it's a prized possession, and you were gifting that to the next generation. Well, how would you describe to whomever you're gifting it to, how would you describe the way that you would like to see that possession taken care of. Think about your family banking system in the very same way. It's literally a prized possession. It's a business that the family is operating. And when you go to transfer that to the next generation, if the conversation is solely around, here's how much death benefit is going to transfer. Yes, it's tax-free. Yes, there's going to be enough money to make sure that the family doesn't have a bad financial day for the rest of their lives, provided that the wealth mentality gets transferred, not just the dollar. And that's where we come in. That's where we come in to guide and to provide very, very simple recommendations on how to communicate that and how to transfer that mentality so that, like you said, you know, and you mentioned in your talk, money transfers, but it doesn't just get squandered, right? It's not just the recipients, the beneficiaries taking that money and blowing it. But I'd love to hear your take on that too. What comes up for you when you're having these conversations and sort of preparing people, casting a vision of the future? What comes up for you?

If you're not having those conversations, then all you're doing is you're setting up the following generations which should be your legacy for failure, right? Because you're not paving the way and you're not setting a strong foundation, whether that's financially or through those values that we keep talking about. Now, it reminds me of— I don't remember the exact quote or whom it comes from, but it's interesting when in Nelson's book, when he thinks— says, talk— think long range and that even distribution of age classes. You know, it's at least think through 2, 3 generations down the line. And if you think back, I wish I could remember the quote, but it's the first generation struggles and earns, and then the next generation gets to bask in all the, the excess and the, and the, and the, the treasures and the wealth. And then by the third generation, it's squandered. Right. And you can just look into history and look at big family names. And realize that there's names not like the Rockefellers, but the Vanderbilts that started out with immense amount of wealth and then look where it's at now.

Yeah, good point.

Very good point. We know success leaves clues, and that's why history is so important. That's why Nelson's background is so important when it comes to this concept, because he paints the picture for you He's already gone through the suffering. He already went through and paved the way to figure out how to do this in a not so painful way because he's already fought the snakes and dragons.

100%. And it, you know, you may know this because you've heard, obviously we've talked about it so often as a team. When Nelson went through that period of suffering, if you were to amplify that into what the value of that would be today. So back in the early '80s, when he owed a half a million, $500,000 in the early 1980s was more than a small fortune. And he was already paying 9.5% interest on that debt. So like $47,500 in interest. And when the interest rate skyrocketed, and if you were a prime customer of the bank, you were paying 21.5%.. And like Nelson often said, and it's so true, I've never met a prime customer of the bank. And so you're always paying prime plus. So that equated to another $67,000 on top of the $47,500 that he wasn't expecting to pay. Now, if that doesn't create just a tiny bit of stress, I don't know what will. As I shared at the event, and he doesn't explain in the book. He had, much like anyone, he had the option to file an assignment in bankruptcy. His joint venture partner in all of that real estate filed for bankruptcy, but the liability was joint, meaning it's jointly liable, severable. Nelson was on the hook for the entire amount. So this is very important for people to, to hear. If you are jointly liable for a debt and one of the parties to that debt files for bankruptcy, that does not take away half the liability. So he was still on the hook for the whole deal. And he said, look, I, I could have just filed for bankruptcy. People were telling him, just sell the real estate, Nelson. And he questioned it. What fool is going to buy this real estate from me at today's rates of borrowing? So the solution that he had right in front of him didn't matter to him until he began to think about his thinking. And he realized that he could get money from the life insurance companies at 6 to 8% and pay off the snakes and dragons at 23-plus percent. And it took him 13 years to do it. And so you're right, the way that he explains how he suffered, how he came through that, and that's why it's so poignant when he says, unless you understand the problem, the solution just won't matter to you. And he extended that well beyond just being in mortgage debt. To the banking function in general. Isn't that good?

Oh, it's beyond good. And I'm glad you brought up that example because I just like to drill down a little bit more and unpack that if we can. Sure, sure. So let's just— when you— because you give a great talk all the time when you talk about generational family values and how that's got to be on par the family banking system and that generational or intergenerational wealth.

Yes, yes.

They're intertwined. One, one can't exist without the other. And 100%. I just want to— I'm glad you bring that up because a lot of times people will immediately or assume that by a certain person's profession that they're going to be of a certain character or have certain values. Right? But you can just— because they may have a professional designation or status. But think of Nelson's partner, and you think about, he knew it was going to be a hard road. So think about the values that he has, what his character is, to say, nope, I'm— I said I was going to do this. I'm now in a difficult position, but that just leaves it to me to figure out how to get past this, how to persevere through this, not to quit, not to give up. So just that right there in itself, you know, you could probably, you could probably do a webinar on, right? Resilience. Yeah. Yeah. So, you know, that, that's, you really got to pick these things apart bit by bit because that's what really matters is when you talk about a person's character and what their actual values and beliefs are. So I think that it's such a strong foundation, you know, for IBC, but even for the NNI where, you know, look at the people that founded that and look what type of individuals they are and how they were able to come together as like-minded people. And the message that they're trying to— the message that they're trying to promote of, you know, helping people see that there are better ways to do things in life that are going to benefit them and not benefit those that, you know, are trying to take advantage of them. 100%. Yeah, I just, I just think every time I think about that story of how, you know, instead of— he could, he could have, as they say, he could have tucked tail and ran. He could have went the opposite way. He could have just thrown in his hat and quit. But he's like, no, not doing that. And, and look at 13 years.

Yeah, 13. And that's, uh, I couldn't even imagine because knowing what my sister and I went through growing up in that time where my parents experienced the very same thing where literally we came within a millimeter of our home being foreclosed on because of that rate hike. And my dad was like, "This is not going to happen." and he just worked more and he was always away from home and my parents were always arguing about money and it was just an incredibly painful time. And so when people look ahead, if all that we did was leave behind money for our children, if that's all that we left behind, then we strip all those other values away from them.

In the military, we call that deconfliction. Because there's lots of moving parts, right? So, you know, there's lots of moving parts on the battlefield, but that being said, there's various different levels of people operating at doing different things at the same time. So has lots of moving parts. So whether it's your immediate family or it's your greater family, if you're thinking about the family banking system, these conversations have to happen. Because intergenerational wealth is nothing without those values because it'll just be eventually squandered because they don't understand the importance or what you're trying to achieve.

That's exactly right.

I love every time that you get up and you're given a presentation and people ask you about your family banking system and you state it's a business and then you get serious with them and you're like, yeah, This is, this is what it takes to be a part of this. You have the right to not participate. However, that comes with consequences. It's your choice and decision to make, but if you are going to participate, this is what it looks like. And the fact that you line that out so black and white, they're just like, it's like, but it's like, you know, if, if you're not If you're not going to be serious with this, yeah, if you don't take your family value serious and you're not going to take your family banking serious, then what are you putting all that effort into?

That's a great way to think about that. It's, uh, at the end of the day, it really truly is a business, right? You're dealing with money, you're dealing with the use of that money, and you want money flowing back to the family's money pool. So that it stays where it belongs within your control as a family. And that comes with responsibility and a method that should be, by all accounts, it should be ridiculously simple in terms of you request a policy loan. There is a documented plan for repayment. There's an agreed-upon rate of interest that, again, a fatal error in thinking is that the infinite banking concept is a matter of interest rates. That's not where we go with that. The reason that we apply a non-negotiable rate of interest to borrowing from the family banking system is not because we think that interest rates are a function of the Infinite Banking Concept. That's not it at all. It's the whole idea that capital has a cost. It wouldn't be that long a period of time before the business was no longer legitimate and no longer operating. So it's the very same thing within the family. You, you have You have to treat capital with respect, but you have to understand that capital always has a cost, and that is non-negotiable in our family. Yes, we have a one-strike-you're-out where if you borrow, you're on a repayment schedule, you experience some financial difficulty that may be temporary in nature, you communicate with no one, and missed payments occur. One strike and you're out. And so if there's no communication, there's no more borrowing, period, full stop. But if there's communication, of course we will work it out, right? It's like, hey, we can capitalize a payment, we can rework the amortization schedule of repayment, we can temporarily adjust the amount or just capitalize payments on the back end of the loan. There's always something that can be done. But avoidance is absolutely unacceptable. And our children have been educated to understand that from a very early age. And so this whole thing around family banking, what gave rise to that, Ash, is that most people— and I'd love to hear your perspective on this— most people, when they begin their journey with this concept, they begin at the individual level. What is a policy? Design going to look like for me? How is this concept going to be an advantage for me? And they, they are not yet looking at it through the lens of the family. What's your take on that?

I agree. It's, it's only after they get recommendations on for resources from us that they start to really see or come across that. Like, once they've read Nelson's book, they may not quite understand that portion of the book, but that's why it's good to, you know, dive into that a bit more because initially we will have conversations with parents or with individuals and then they themselves may not even be thinking about even just their family as a whole, their immediate family. We always pose those questions when we talk to them like, okay, so yeah, I mean, you're, you know, I see I got your details. This is what you're looking at doing. Okay. I see you also have a family. You have a wife, you have children. So what's your plan for them? Because like, if you're thinking about looking after one individual, why are we not looking after the family? Because like we say, you know, you don't have a lease on life. You don't know your best before date. And unfortunately, God forbid, things do happen in life. If you're going to look after yourself, so to speak, by indirectly looking after your family, because there will be, you know, a tax-free windfall that they will receive. Upon your death, how are you looking after the rest of them?

And then that's when you immediately see the curtains open up for the person that you're speaking to. And it's like, yeah, I really— I didn't think about that. Especially if you're starting with an entrepreneur, an established business owner who's doing this to bolster their balance sheet and to do something more productive for their company. And you sort of open that curtain and say, "Hey, behind this curtain, we've got your family. And God forbid, if the unthinkable happened to you as the owner, your family is still going to continue to rely on that source of income, the company. And so what are we going to do to take care of the family? Also take care of key people who you envision being a succession plan for you, that you envision taking the business forward." if the unthinkable happened. And it just opens the eyes of the client, and the client goes, oh my goodness, like, I didn't even consider that, you know. And that's one of the other beauties of why Nelson named it Infinite. And he would explain this to people when he was speaking, and he did so many speaking engagements every year. He would explain this to people. He would say, impossible to assign boundaries to infinite. It's an exercise in imagination. And I'll give you one example, and you may be well aware of this having read Nelson's book a number of times. He said, you know, people would approach me and say, you know, the illustrations that, uh, that you put in the book— and just a side note, Nelson said if he could have rewritten it, he would have left the illustrations out of the book— but he said, you know, people approach me and say, Nelson, like, these were illustrations from You know, early 2000, dividend scale interest rates have changed and the, these policies would look different today. And so when he released the 5th edition of the book, he said, uh, let's address that. And he used the equipment financing example and he said, all I'm going to do is pay the premium for one additional year. All I did was exercise my imagination. I paid the premium for one additional year. And look at the net effect. And I'll leave viewers and listeners in suspense and they can go and read that in the book. So that's what he meant when he said, "Hey, just exercise your imagination here." And so that was just one of many ingredients of his brilliance.

It's also having those important conversations. You mentioned business owners. So a simple question, when we're sitting down with them and we're going through you know, their questions or financial statements or whatever that is, you know, we'll just say simply, okay, so like, what's, what's your long-term goal with the business? What's your exit strategy? Usually there's a bunch of blanks. I haven't thought that far.

Okay.

Well, I mean, it's a business, it's an asset. So it's either going to— there's either going to be a succession plan that it's going to be passed on to a key person or a family member. So it's either going to be passed laterally or it's going to be passed down, or you're going to be looking to, you know, exit, and that exit could be in the form of a sale. But when you're thinking long range, that needs to be part of the plan because that's going to affect if you have, you know, corporate-owned policies, it's going to affect. So all of these things are details that you have to discuss and that has to be part of the conversation, right? So it's asking the right questions about specifics for those individuals and adding on to that from a personal perspective. When we sit down with individuals that are looking at even just personal, you know, coverage on themselves, personal policies, and they're always trying to achieve and stuff everything into one policy. Yeah. And then I— and then, you know, we have to explain to them, like, there's a reason why Nelson said this is best achieved through a system of policies is because you may be starting now. You start where you're at, where you are 5, 10 years from now is probably going to look very different, whether that's an income increase, whether that's a windfall, whatever that is. So you can't plan everything into one. And I always say, think like a bank. Is a bank better with one client or multiple clients? They say multiple clients. I said, right. So spread that across multiple policies.

Very smart. Very smart. And, uh, you know, over the years, having again been in this, um, position of having to, uh, fulfill that duty of care when, when that call comes in, it's a family and a loved one in the family passed away, and we have to honor that duty of care and deliver that death benefit. And when we look at scenarios where we've got a family, we have a system of policies, and, you know, the patriarch of the family passes away, and the matriarch of the family's insured, the children are insured, and, you know, they've been implementing the process, and this tax-free windfall comes in, not only backfills any outstanding policy loan balances on the remaining policies in the family, but it provides more than sufficient funds to cover the premiums on those policies so that the system continues. And then down the road, the matriarch of the family passes away. Now there's a cascade effect. There's another death benefit that flows to the children who are now fully grown adults, use that windfall, backfill their own policies. Erase any outstanding policy loans, residual balance, can use for whatever they wish, but there's more than sufficient funds to continue paying the premiums on their own contracts. They pass away, grandkids, the cascade effect, it's powerful if it's done properly. And if there's clear instruction, I'll share this, uh, story. Nelson called David Stearns, his son-in-law, who's president of the Nelson Nash Institute, and I'm very blessed to be an advisor to the board of the institute. That's one of the greatest honors of my life, and I made a promise to Nelson before he passed and working hard each day to honor him and to honor that promise. And he called David and he asked David, he said, David, what is your outstanding policy loan balance? And he wanted sort of a cumulative amount because David has multiple policies in his family. And so David thought, oh boy, like for an instant his thinking went back to the old way of thinking. He thought he was going to get in trouble for telling Nelson like, hey, we've got "just over a half a million in outstanding loan balance." Well, Nelson couldn't be any more thrilled to hear that. And so David was relieved because Nelson said, "All right, you've got a place for the windfall." He wanted to confirm that David had a place to store some of the windfall that he was going to receive from the death benefits on Nelson's policies that he was bequeathing to his family. So he's calling the people in the family and saying, "Hey, what's your outstanding loan balance? I need to make sure that you've got a place to store this windfall." So these are the types of discussions that we are passing along to our clients, to the general public, people who are researching and exploring this concept, is that just looking at a life insurance contract is just so surface level. It's like, it's not even infinite banking. It's not even remotely infinite banking. It's all the rest of it that is the real essence, the real substance of it.

Yeah. And in your story there, that's Nelson thinking long range, right to the very end, right? Just making sure that, you know, because it's got to reside somewhere. So, all right, we're good. Okay, we're good.

Can I tell you this, Sasha? Tell you this quick story.

So, go ahead.

This, uh, Nelson had been, you know, describing that he was teaching Mary to be a widow because he had been convinced that his graduation was, uh, you know, wasn't too far off. And he calls me one day out of the blue and he said, uh, can I, can I share something? I said, sure, Nelson. He said, um, the rumors of my demise have been grossly over-exaggerated. And I said, okay. He said, um, have you ever heard of the immovable object theory? I said, Nelson, I, I haven't. He said, well, I was shaving the other morning and I slipped and I fell and I hit our bathtub, and that bathtub did not move an inch. The immovable object theory. Oh God, he was so— he, he was just so funny and witty like that, and he would just call you out of the blue. And but you know, the, the one thing that I, I miss so much, among many things, is that he would say something like— I'll just give you, uh, an example. He would say, read, read chapter 4 think about it, and then call me. He wanted you to, to take some lesson. So immediately your brain goes into, okay, my mentor just gave me direction, he wants me to go and read something and think about it. And when Nelson asked you to think about something, he wasn't expecting a phone call from you an hour later. He wanted you to what he would refer to as ruminate. He wanted you to ruminate on it. And then call him. And when you did, if you got it, if you got the lesson that he suspected you would get, he would always have a little giggle and he'd go, "Mm-hmm," just a tiny little giggle, and you knew that you got it. But if you didn't, he would take that time to help you think about your thinking. That is what he was so brilliant at. And he would do that by asking you a series of questions. That would eventually get you there. And when you got there, he would say, precisely. And he would always appreciate that, that you could think, because he reminded us often, he said, most people would rather die than think.

You can just— you can see even just the emphasis in his book where he puts so much emphasis on the human condition and our behaviors. And that's definitely the most important. And that's why I, you know, I mentioned that during our live event, like at the end of the day, numbers are numbers. Insurance company is going to contractually do what they're going to do. The most important thing in this entire equation is your behavior, because definitely once you're put— once you're put in the driver's seat and the restrictions are removed, right, the governor's taken off. Well, that's a lot of responsibility now. So how you're going to manage that and how you're going to drive that car, you know, it, it matters. I really enjoy having conversations with people, but, but just focusing on their behavior, where they're at in life, and what their actual goals and objectives are, because that's what it really comes down to. I always say this isn't an off-the-shelf thing. Like, it's not— you walk into a store, I'll take that one, that one looks fine. It doesn't work that way, because if you're looking to actually be serious about establishing infinite banking in your life, setting up a family banking system, there has to be a plan. And like you said, like, if there's no plan, then you're just planning to fail. And so you have the time, you have to put the time in, you have to put the time in, right? And you have to dedicate and focus on what's actually important to you in your life, for you and your loved ones.

So true. And when you look through the lens of family banking and you find yourself thinking, how am I going to structure that? How am I going to convey this and have these important conversations with the family? If you look at the simplicity of a banking business, of the model, people deposit money, banks are in the business of being a deposit-taking institution, banks are in the business of lending capital, and when they lend capital, there's always repayment schedule, there's recourse if repayment doesn't occur. And if you look at some of those simple elements, those are quite easily translatable to the you and me level. There isn't anything that I just described that wouldn't be applicable within the family banking system. And the emphasis that we place on treating it like a business is crucial. Otherwise, you run into, which for many people, an obstacle that can be impossible for some people to overcome. Well, I don't lend money to family because it creates stress or it creates tension or it creates pressure. Well, what's the alternative? They're going to need to use money. It has to come from somewhere. They're going to go borrow it from someone else's system. And all that financial energy is going to flow away from the family. And so if we can take the time to think about our thinking, what are the disadvantages to overcoming that obstacle? Well, there are none. So having a good guide like yourself where people can sit down and say, "Ash, we just want a sounding board. Can you help guide us through our thinking?" Well, I mean, you're all over that. You'd be like, "Yeah, of course. I'd be happy to guide you through that." It's so important because we meet far too many families where so hard and they may be earning great income and they still feel stressed. They may have a home that their family's comfortable in, driving a car that's safe and reliable, and they get to go on family vacations. And by all accounts, they're enjoying a lifestyle, but they're stressed. And when we pinpoint the problem and they catch it, they recognize immediately that there's a way through that. There's a way to alleviate that stress and create a very peaceful way of life financially.

And becoming your own banker is the solution to that problem.

We can say that, but a person has to catch it. And in order to catch it, you have to think. There's no escaping that. There's no leapfrogging it, except for the people who connect with you and say, "Explain infinite banking to me in 5 minutes or less." That should be a signal to you to pick up every red flag on your desk and recognize immediately that that may be a person who would rather not think.

Yeah, a while ago I was, um, I contacted an individual and, you know, I said hello and introduced myself, and he's like, okay, He's like, all right, go ahead. And it was just like, you know, you got like, you know, 20 seconds. And I'm like, I'm like, well, I mean, you know, it's, it's not really doable in 20 seconds. Like if you're looking for an elevator pitch, whatever. And before I could even get through explaining, like finishing explaining the first sentence, just hung up the phone.

Sounds like a pleasant person.

And I said, I said, oh, my apologies. I think we've got— I think we got disconnected. And then he said, okay, go ahead. I'm still waiting. He did the exact same thing, hung up on me again. He's like— and then, and then started like yelling at me, like, if you can't, if you can't explain this to me, you know, and you don't even know what to say. Well, then, you know, I don't want to bother listening. Hung up the phone again. And I was like, and remember, these are people that have reached out to us. So you return the call to say, hey, you know, how are you? And, you know, and yeah, you know, I'd love to explain this to you and, you know, help you understand what we're talking about here. And you don't even get past the first sentence and it's just a hang up. And I'm like, okay, well, that's, that saved me some trouble.

Oh, 100%. Yeah. You know, we meet all kinds of people and thank goodness, you know, the majority of the people that we connect with are genuinely in that frame of mind where they have a desire to learn, to explore the process, to establish a basis to work together. And we're really fortunate. We get to talk to literally across our team, you factor in Canada and the United States, like we are literally having north of 1,000+ conversations a week. If you had told me that, Ash, back in July of 2008, if you and I had occasion to meet each other back then and you said, "Hey, I just finished polishing my crystal ball and let me take you to 2025, September of 2025, and you're going to be working alongside me and some other wonderful people and we're going to be making all these calls and connecting with people, transforming their lives." I wouldn't have seen it back then.

Well, we probably could have met in 2008, but I wasn't on this continent. Just so you know.

He's like, you would have had to have traveled just a tiny distance.

Exactly. And yeah, and I, you know, from, from the live events this past weekend, there was one point where, you know, I do believe that sometimes less is more or a lot of time, actually. And that's why, you know, when I brought up the Deems disposition and people really weren't sure what I was getting at, and then I just elaborate on it and, you know, you just break it down very simply. Look, When you pass away, the taxman is going to— there's going to be a bill that's going to have to be paid for taxes. So you either are putting a plan in place to address that or you're leaving it for your successors to deal with. That's it. That's the— that's, that's how easy it is. So you're either thinking about it and doing something.

On that note, we talked a lot today about thinking and we've been expressing at every opportunity that we invite people to think about their thinking, not yours, not mine, not Nelson's, their own. And we can educate and provide great resources, whatever the person's preferred method of learning is. If they like watching videos like the one you and I've recorded, if they like listening to podcasts like Wealth on Main Street, if they like reading like Nelson's book, whatever their preferred method of learning is, we cater to that. But they really have to think about their own thinking in order to catch the infinite banking concept. And how advantageous it is. And when Nelson, you know, when he got close to graduating, he really went out of his way to remind people what a peaceful, stress-free way of life it is when you get the banks out of your life. And people were just nodding in agreement with him because they tried to picture themselves in that scenario. And he said, we haven't dealt with a bank for the past 20 53 years for anything other than the convenience of debit. Wow. You just see a look on everybody's face. How's that even possible? Like, wow, I can only imagine what my life would be like. And now I'm living proof of it. And it's rather odd that it took Rebecca and I 13 years. Welcome to the world.