How to Prepare for Future Financial Windfalls

One of our mentors, the late Bob Shiels, him and I were talking on the phone and he said something that I wrote down on a post it note and I actually kept it. And he said, jason, if someone truly wants to save money, all they need to do is repay policy loans. Think about it. And that was like, wow, I gotta write that down, Bob. That was really, really powerful. It's the truth. And that is a storage place for future windfalls. You ever hear the song free fallen?

Good old Tom Petty. Yeah, you've heard that before.

Tom Petty, classic tune, amazing classic tune.

But that's not what we're talking about today. It's not free falling. We're talking about the free falling of the free falling of money. No, windfalling. Maybe we should write a song called Windfall and all about where to put your windfalls of money.

Maybe we should get ChatGPT to write us a song about windfallen and then we can sing it to our community. But that's what we want to talk about today. So the, the, the windfall, you know, preparing for that. If you, if you have, if you've implemented the family banking system in the sense that you've created policies. Because Nelson shared in his book becoming your own banker, he said, this is not meant to be achieved through the device of a single policy. This is meant to be a system of policies. What he meant by that was multiple lives insured. He didn't mean, hey, you need to be the only life insured and have a quantity of policies. That's certainly part of it. But he also reminded everyone of the obvious, that death will come, and when death comes, there will be a death benefit. And that death benefit is income tax free. That death benefit shows up in the form of money. And Nelson aptly referred to that as a future windfall. Our question to all of our viewers, subscribers and followers is how prepared are you for the inevitable and how prepared are you for handling those future windfalls?

And are you thinking, are you thinking about it? Are you rethinking? You're thinking about it?

Right?

Yeah.

Like, are you even aware of the approach that you may want to consider for dealing with those future windfalls?

And I think in this point in time, in our society, most, most people, and maybe this will change, and I would like to think me might be part of that change. But at least from my existence and from meeting with people for 15 years, the Conversation, especially from parents to adult children about what might happen with money is virtually non existent. Right? In higher net worth, wealthier Families, sometimes there's more conversation around that, more, more planning. Often other professionals, accounting, estate professionals, whatever are involved, but they're doing all the planning and all the stuff. But they're still generally not bringing the adult children or whoever into that conversation so that they're incorporated in the plan. Right. And I think that is a real, it's a real downfall and that one of the key downfalls that's created is often human behavior, which Nelson talk to about ad nauseam. The importance of human behavior. Yep. When you receive a large amount of money and you know, you use a simple example. Do you know anyone who's ever won money on, let's say a lottery or whatever, a large sum of money for, for something to that effect? Well, what happens when it, when they get it, it gets squandered away, typically in a short period of time, under five years and everything that they had is gone. And in fact the things that they had before the money showed up is even gone. Relationships get deteriorated, people go into bank street, all kinds of associated things take place. Because we're not really well trained how to deal with large sums of money and, and especially when large sums of money are received or in relation to the passing of a loved one, that there's a whole additional dynamic that's added into that equation. And if a person has a lot of, you know, maybe complicated or more complexities in their financial picture, like they own a bunch of multi family real estate or they have, you know, one to four corporations and one's a business and one's got real estate and one's got this. It's like there's no preparation on how to deal. You know, I had a conversation about with someone earlier today, Jay, awesome guy, he's a multifamily investor in Ontario. He's looking at the process. He's got to read the book and go through some more information first. They've got about 20 doors. He has adult children that are in their mid-20s. They're not involved in the real estate at all. They just know that the mom and dad do some stuff with real estate. Like that's the extent of what they know. And so if something were to happen to them tomorrow, turns out they don't really have any insurance right now. They've got these buildings and the buildings have equity. But one of them is in the middle of a renovation. So if they died and there's no one even there to deal with finishing the renovation, now they got to go sell the properties and then they got to close a Corporate like there's no context about what they're going to do. But that would be a windfall event. And so the kids have no anticipation or no planning around it either, you know. So what stemmed this conversation is actually Nelson's second book, Building your warehouse of wealth. Phenomenal book. Chapter seven is anticipating a windfall.

Let's put in, let's put a link in the deal so people can go and get the book. Like if you haven't read that book.

Amazing, you need to read it.

And we'll. Let's put a link in the deal so people can go and pick up a few copies.

We, we can make that happen. Now I'm going to read a couple pieces of this and we'll just kind of flush it out and talk about it. But again, Nelson starts off the chapter that wealth has got to reside somewhere. Dividend paying whole life insurance is an ideal location for. And if that is true, which it is, then one needs to anticipate such an event by preparing a place to dump a windfall. So estate is one of those things. Selling rental properties, large tax refunds. There's a number of different things that happen that create windfalls. He talks about an example when he sold a piece of real estate that he owned and he had it for a long time. It was a raw land and it was the epitome of a frozen asset. It wasn't generating cash flow, it was just raw land that he owned when he comes into a significant amount of money. What did I do with it? I paid off policy loans on a policy that I had bought 13 years earlier. This policy was issued at a rating of preferred plus. So at the time that this happened, had land, sold the land, big pot of money. I got a bunch of loans, pay off the loans. Well it was, it was the effectively like going back in time 13 years with a preferred health rating because the policy was, had 13 years under its belt and he eliminated the loans down to zero. So it was effectively like he bought the. Bought a 13 year old policy. Today is essentially what Nelson was trying to teach us, that we, we have.

To really pause there for a second. We want people to really think about what you just said because you, you can't go back in time and create anything that's more efficient than that. So again what you were describing around having a place for a windfall, which that place is an outstanding policy loan balance, that's the, that's the place for the future windfall. He repaid it. The policy has all of that energy that Was so creating the live steam. Page 15 of Nelson's book. He's 13 years into the deal.

Pays.

Off the loans, has all that energy still getting more efficient every single day inside that policy. That's the equivalent of him purchasing.

How did you describe it, a brand new 13 year old policy today that's got all that energy under its belt. And I'll use a real estate analogy to expand on this. So imagine that you bought a, a property, a 12 unit apartment building for a million dollars 13 years ago. Well, if, if that property was in the Ontario marketplace, that, that's probably worth like $5 million now. Yeah. Okay. And, and the cash flow has gone up, the rents have gone up, and, and so on and so forth. So just imagine you could go and buy that, that property today that's worth $5 million, but you could buy it for a million and have it fully paid off and have all that cash flow coming in. Think about effectively what Nelson accomplished in this example. Totally.

And if I can expand on what you just said, we in our family, we have six policies on each of our four children. Each one of our four children have six policies on their lives. A quantity of those policies are going to be utilized by Rebecca and I for as long as we're alive. They are the lives insured, we are the policy owners. So we're doing the very same thing. Because when Rebecca and I are gone, the windfall, a portion of, of the windfalls from our death benefit proceeds are going to pay off the policy loan balances on the kids policies that were earmarked for that purpose. And by that point the kids will essentially now have an asset as though they had purchased that policy on that day and they already have 30 plus years of financial energy that have built up in those policies. Brilliant.

How efficient is that?

And the reason I share it is because people want to know what should I be doing? I, I met with a gentleman yesterday from the west coast. He said, yeah, I'm buying a policy for my nephew. The moment he turns 18, I'm going to gift it to him. I said, to set him up for failure.

So you can imagine he has no idea what to do with the policy. What's he going to do with it?

You can imagine what cancel the action was. And I went on to explain to him, you're creating an asset for your nephew that he can't create for himself today. He's four years young. When he turns 18, if you hand a valuable asset over without transferring any of the knowledge, the wisdom, the stewardship the understanding, the b, even the rudimentary understanding of what that is. What are the odds that by age 20 he's still got that asset? Extremely slim to none.

And we, we, we can validate that because how many advisors and colleagues in this industry do we know, Jason, that they were. That exact scenario happened to them. They were gifted a policy that their parents started or a grandparent or who, whatever, they received it somewhere between the ages of 18 and 25. Imagine that they had a need for money, like they needed to go use the money to do something they didn't know, they didn't understand. They canceled it. They gave up the death benefit. They gave up the many, many years of growth potential on that policy. The windfall event to their own children, because at the time they didn't even have children. Like the thinking model of an 8, you know, someone in the 18 to 25 category whose brain hasn't even fully developed yet. They just can't comprehend unless they're given the stewardship skills along the path. I've told my, even our colleague Winnie had an example like that and there was several other people that we've had even attend our sessions, advisors in the industry, hearing these stories of the what if, if only I would have kept that policy. And, you know, hearing those comments is, is aggravating because even your own, your own fault, you have a story for your own father in regards to that. These are the kinds of things that happen in the industry because of poor habits and a poor understanding of human psychology and a reference to time and where people are at in time. What's happening in their, in their life.

Yeah.

Relative to what they. How, with their ability to even forecast and anticipate their own future to some degree with, with reasonability and some logic.

Yeah. I've, I can tell you, you know, my oldest, my firstborn, my son Jackson, he's 15 now, and he, he would tell you, if he were on this podcast today, he would say, my dad has shared with me very clearly that if I want to take over ownership of one or more of the policies that he's created, I have to demonstrate to him how I plan to utilize it to implement the process of becoming your own banker. The infinite banking concept in my life. And I have to demonstrate my ability to be a good steward of that asset. And then if he checks the boxes on that, he has to pay me what that asset is worth. I'm not going to gift it to him. As much as I love him, as much as I love to be giving, I would Be setting him up for failure. And this, you know, you speak of my late father, he owned a participating whole life insurance contract. He retired. His advisor said, Bob, you don't need the policy anymore. You're retired. You have a defined pension.

Yeah.

You want to go out and buy some snowmobiles and a new set of golf clubs and a bunch of toys so you can enjoy retirement. Why don't you just surrender the policy, keep get that cash value and go and enjoy your retirement. And a year later, almost to the day that he retired, he died suddenly and unexpectedly. And there was no windfall there and no place to put a windfall.

And no accountability for the adviser who gave a horrific recommendation with, with, with very poor data and information because the industry, it's not because the guy was, was an a hole. It's because he didn't know and he didn't know and understand he had the right intentions. Yeah. He believed he was doing the right thing.

Yeah.

But he had a piss or amount of information to utilize in helping provide that guidance. Yeah. And it, you know, just unbelievable the things that happen. And so circling back to Nelson and anticipating the windfall. I'm only on the first page of this chapter, by the way. When I bought that policy, I did it, I did not do it for death benefit. I bought it to create a place where I could put money that I could borrow to pay off the banks that were charging him outrageous interest rates.

Right.

So his intention wasn't for the death benefit. Doesn't mean he didn't need it. But the purpose was, was separate. The procedure is obeying all the principles of economic value add. Now he further goes on to say, you know, again, when Nelson paid off that policy, I believe 13 years later, it was after he had had his quad bypass heart surgery. So not only did he backdate, you know, it's like backdating that policy and getting a 13 year old asset without any of its, any of its startup costs. He was uninsurable at that point, so he couldn't even go get that insurance otherwise. Yep. I mean that's so, so important to understand the failure to recognize that the earlier person starts a life policy and the longer it is enforced, the more efficient it becomes. One of the key things he, he talks about here that I think is really, really important. We need to identify that the real penalty of delaying getting a policy started is the huge difference in cash value when one elects to get income or passive income at a future point in time. And so why not? He has this interesting suggestion and I'M not suggesting that everyone goes and does this, but it's about a thinking, rethinking our thinking, which Nelson talked about. So why not start up a new policy now and pay the annual premiums for, for four years or four, four or five years now and then you can borrow from this policy to pay the premium due on it for the next 14 years. This will create a place to put windfall of money. You have a big outstanding policy loan. If you know you have a large anticipated windfall in the future, could you not then have a place to put that, that windfall at that point in time? So again, the purpose here isn't to make that immediate suggestion. It's about thinking through the question, what if, what if I had a bit more of a crystal ball and I could understand some, some reasonable things happening in our future. He mentions how his mother in law died. You know, by the time he wrote this book about four years previous, she was in a skilled nursing home for about three or four years. She wasn't coming back home at that point. It was costing them $5,000 a month to keep her there or $60,000 a year. Well, they had a place to put money when that $5,000 expense was over. That was in their budget, wasn't it? He, he still had the $5,000. He needed a place to put that $5,000 when the retirement home was over. Well, that's a great amount of money that could go against policy loans. That's right. Because he had a policy to put it into. That's right. And if you wanted to put it in a new contract, he might not be able to get a new contract in place because he was uninsurable his own age. The amount of bodies he'd already insured, they might not have the human life value like so many ripple effects, but by having that policy in place and having, you know, an outstanding loan on it, he already knew where the money was going. It wasn't going to go to, you know, buying a bunch of expensive things and just disappearing immediately in his budget. Instead it could be refocused energy back towards his, his legacy that he left behind for so many other people.

Yeah, this reminds me so much of the conversation that would come up where Nelson and again, you know, we, we were blessed beyond measure to have spent so much time with him. So we're sharing with our viewers and our subscribers, our listeners, snippets of these great nuggets of wisdom that Nelson passed along to us. But the topic of diversification would come up inevitably If Nelson was surrounded by a group of people who have an investment mindset and he would help people to think about their thinking, to say, I have 40, 48 policies with multiple lives insured, every one of them is going to die someday, there is a guaranteed, I say again, guaranteed windfall. I think I'm pretty well diversified. His point being is that he was very understandably, so very clear about his thinking that you don't have to play their game, meaning you don't have to play the Wall street game, the Bay street game, the tax qualified plan game. You simply don't have to play their game. You can build your own operative words, your own warehouse of wealth, and here's how to go about doing that. And so that book, again, I cannot emphasize enough. And the other thing I want to share with people who are watching and listening, if you haven't already, head on over to the YouTubes and look up the Nelson Nash Institute and subscribe to that YouTube channel again. That's the Nelson Nash Institute YouTube channel. And serving at the pleasure of the board of the Nelson Nash Institute and Richard, being a member of the esteemed practitioner council, we want to encourage you to subscribe to that channel so that you get an abundance of content. And you're hearing directly from the creator, the developer of this process, the late R. Nelson Nash. And we have curated a mountain of content that is going to continue to land on that channel. And so ease on over there, Nelson Ash Institute, hit that subscribe button. You'll be glad you did.

You're going to be seeing and hearing a lot more from the late AR Nelson Nash.

And you will see and hear him everywhere. Yeah, guaranteed that I can also stamp a guarantee on and credit to.

Not. Not in the same way that Tommy boy would have done it.

No, no, yeah. No, definitely not. But so windfalls. Windfalls can be engineered. So when you're sitting down with your family and you're wondering, how can we, how can we implement this as a family? If we think about this from a ridiculously simple perspective. Nelson shared it best in his book becoming your own banker, where he said you should ultimately ensure everyone that you have a beneficial interest in your kids, your grandkids, your nieces, nephews, your spouse, your joint venture partners in real estate, your key person in your company or companies and so on.

How many policies do you have on key people Own business partners, Jay? Like seven or eight of them now? Something like that.

Yeah, yeah, we. And in total, we have 73 in our family banking system now.

Right.

And that number is going to grow yet again because you and Sarblo are taking out a policy on my life because of the permanency of our business relationships. That's a necessity. That's a sharp example of what we're talking about.

Yeah, Jason already got one on me like three years ago. I've just been slow to the party. And so you know, my, my quick start energy. He's like, hey, I already verified that we've got amount of death benefit that we can hand you. I'm like, hey, perfect, let's get that application going. So done. Yeah.

And so creating the windfall is one thing. Having a storage place for it is something altogether different. And that's through the utilization. And when you and I talked before we hit the record button around the fact that I don't think I mentioned this part of it, but one of our mentors, the late Bob Shields, him and I were talking on the phone and he said something that I wrote down on a post it note and I actually kept it because it was such a powerful, powerful remark from him. He said, and Bob at that time was about 87 years young maybe.

So I didn't right before he, he probably passed then. Yeah.

And he said, Jason, if someone truly wants to save money, all they need to do is repay policy loans. Think about it. And that was like, wow, I gotta write that down, Bob. That was really, really powerful. But it's the truth. And that is a storage place for future windfalls. People may have heard the story. David Stern's Nelson's son in law had a large policy loan balance. Nelson contacts him and says, what have you got in terms of an outstanding policy loan balance? And David thought he was going to.

Tell me about your loan. Tell me about your loan portfolio, son.

And David thought he was going to get in trouble. And Nelson, once he heard the number, which was several hundred thousand dollars, Nelson said, excellent. And here's the reason why that's excellent. One day I'm not going to be here. And when that day comes, you're, you've got a storage place for that windfall. And then he coached them through it. And so this is what we're doing with our clients in our community is coaching them through that as they, you know, build their family banking system. They recognize that they're not only creating a place to take control of the banking function to make sure that money's flowing back to the family, but they're also creating storage facilities for future windfalls.

Isn't that good? I've got a policy. I Built intentionally for the purpose of windfalls already. And you know, I, I do my best to not steal a piece on that policy. I don't put a lot of extra financial energy into repaying policy loans on that one specifically. I have other places to do that. Yeah. And, and that policy also for me in my system is also a death benefit policy. So it's primary function and intent is different than other ones in my system. Right. If I have windfall events and I do expect some in the future have a place to go deposit money. Meanwhile the death benefit on that policy is quite substantial. Yeah. It has a lot of extra term insurance and everything on it. So its focus is something very different and it'll self complete if something happens to me, heaven forbid, early. Those policy loans will be taken care of regardless and there'll still be a windfall that's going to show up for the family amongst all the other policies.

That will pay out at that time and precisely. And I shared the same with my sister who's a year older than me. I'm all that she has now. Both my mom and dad passed away suddenly and unexpectedly. And so I shared with her when I created a policy on her, I let her know I am going to be utilizing that policy. And the reason I'm doing that is I'm creating a place for future windfall. She's the life insured. She does not own the policy or pay the premium. And so when that day comes and she receives windfall, she has a place to store it. And that's the equivalent of her having purchased the policy on that very day. That already has decades of energy, financial energy. And so this is again just another example of how to get people thinking differently to say wow, okay, I can, I can create these storage facilities for future windfalls and everybody wins. It's great. Anyhow, that was fun. That was good. Wind Fallen that's going to be the, the one of the singles on the new wealth with all Bay street album titled what's against title.

This is, this is your money for your whole life. It's a long title. It's workshopped. We're still, we're still, we're still digging into it.

We're still figuring it out.

Leave some comments on the YouTube for a better album title and we'll, we'll get some conversation going with that. Anyway, right now, boom. Video just popped up right there. It's got some more great content. Content and information on it. You should probably check it out. It's going to be good stuff. Can't wait to see you on our next episode. And, Jay, this is awesome. Appreciate you, brother. I appreciate you, too.

Thanks, everybody.