Episode Transcript

Welcome to Episode Four of Season Three of the Growing Empires show. Today I’m here with my guest, Sarry Ibrahim, from the Bank on Yourself organization, and he’s going to share with you some tips on how to diversify your assets. So stay tuned.

00:16

Welcome to Growing Empires. Hosted by real estate entrepreneur and trusted investment advisor, Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.

00:36

So welcome, Sarry, to the Growing Empires show. I’m so glad that you’re here. Let’s kick off this episode with you sharing a little bit about the work that you’re doing now and how you got into your line of work. Yeah, Jennifer, thanks for having me on. So what I do is, I’m a financial planner, and I’m a member of the Bank on Yourself organization, which is an organization that uses the “Bank on Yourself” concept. It’s a concept that uses cash value whole life insurance, mainly for the cash use the living benefits, rather than a death benefit. And while doing this, we’ve been able to help business owners and real estate investors grow and save predictable wealth on a tax favored basis. And I could definitely get into more details on how these cash value whole life policies are structured and why they’re beneficial. Okay, sounds great. So Have you always been in the financial industry? Or did you come from a different line of work before you got into the financial industry? Yes. So I originally it started in the insurance business, I worked at Allstate Insurance, and I worked for Medicare companies. So kind of within the financial services industry, but more so on the insurance side. And for the past two years, I’ve been specifically focusing on whole life insurance and financial services for business owners and real estate investors. And what area do you primarily focus on? Are you in a specific state? Is it global? Tell me about some of your clientele base that you’re currently advising for. So I could do technically I could do business in all 50 states, all my work is virtual, it’s done over Zoom or over the phone. I have clients in about 16 states now. So pretty much virtual in the US. Fantastic. Well, I’m really excited to share some of these topics with my investors in my listeners. So today, we’re going to talk about the Bank on Yourself policy and get a little bit more into detail about what that is and why that is a good strategy. We’re going to talk about how it’s used in real estate investing strategies, what are some of the tax advantages? And how can it be used for asset protection?

02:30

So let’s jump right into the first question. Why don’t you elaborate a little bit about the Bank on Yourself policy? Yeah, definitely. So it is a cash value, whole life insurance policy. And for those of you who don’t know how life insurance works, it has two main functions. It has the life insurance part, the death benefit, and it also has the cash value insurance part. There’s a cash value insurance part is kind of like a savings account, it earns interest, but it has additional benefits beyond life insurance. And it has benefits that other places don’t offer, like a checking account savings, money market, brokerage account, or investing in the stock market, the cash value of the whole life insurance policy grows on a guaranteed basis, it earns dividends, it’s protected from creditors and predators. And of course, it’s not affected by market conditions. So that’s kind of why business owners and real estate investors use the cash value of whole life insurance, they structure it so that way, it’s it’s emphasized more on the cash value, rather than the death benefit. Even though the death benefit is an important piece of the puzzle. It’s more so about the liquidity and building up the cash value of the of the whole life insurance policy. Okay, great. So do you find that investors or people that are interested in whole life are typically wealthy people? Or can really anybody have any kind of whole life policy? Yeah, I definitely think it’s, it’s for anybody, there’s no really like minimum requirements to to join a whole life insurance policy or to participate in one. So it’s definitely open to anyone. And it’s definitely a mindset shift. It’s not necessarily like an over the counter product that one just buys. It’s a mindset shift, where you’re shifting from thinking like a consumer or thinking like a borrower to owning your own life insurance policy, that can become your own source of financing and your own savings vehicle that you have complete control over, you always have access to that money. It grows guaranteed, regardless of market conditions. So I definitely think you know, everyone should should utilize this policy, especially real estate investors. That’s a great point. So why is this Bank on Yourself policy, why is it commonly used in real estate investing? Definitely. So with real estate investing, there’s a lot of like, so kind of in the eyes, or in the sense of cash, real estate investing, let’s see, there’s a there’s a struggle between do I store my cash and keep it or do I invest it you know, if you store it and not move your money, that’s kind of a loss of opportunity costs, right? You need your money working for you, you need it to live somewhere. But at the same time, if you invest all your cash in places, you might have a liquidity issue. Yeah, you can borrow from banks against your properties. But at the same time borrowing is not always guaranteed, the appreciation is not always guaranteed, and things might not go in your favor. So this is kind of like a risk mitigation, too, where you can kind of plot it in between your cash and your real estate properties, where you can use different sources to fund the policy and vice versa, you can use the policy to fund different sources, different things that you want to invest in. So this way, if things in the economy don’t go the way you planned, you have an asset in the middle of all your in your portfolio, that’s not affected by the market conditions. And that will always allow you to borrow regardless of market conditions. And regardless to of your conditions, if you have credit issues, or if you’re in the middle of a lawsuit, if something’s going on, where you need access to money, but others aren’t willing to loan you that money, you do have an asset that will loan you money. And sometimes it’s not always, you know, your fault, you might have really good credit, you might have cash flow, the relationship with banks, but the banks might not be in a situation to loan out money. So you have this whole life policy in the middle of everything that will always loan you money, regardless of what’s going on in the economy. That’s an interesting point. Because, you know, one of the things that we did see post pandemic, right, is we did see a constraint on the banks for lending money. And although some people had money to invest, and maybe they wanted to leverage up, banks for being really resistant to lending any money, because they weren’t sure what was going to happen for a period of time. It’s gotten a little less constrained at this moment. But that’s a really great point. The other thing, too, that you mentioned a little bit and it does apply to real estate, is that not every cycle of real estate is the best to invest. So you know, right now we’re dealing with limited inventory. And it’s takes a little bit longer to find the properties. So instead of having your money invested in a bank account, that’s really not turning into yields, maybe you could put your money in something like what you’re discussing as almost like a hold pattern until the market changes in the sense that there’s more investment opportunities out there, or different ways to spend your money.

The episode will continue in just a moment.

07:29

This season is all about winning the money game with your real estate investing. However, simply investing in real estate with all of its advantages that it promises, you can still get taken to the bank, if you don’t know how to make smart money decisions, or have access to the right resources to save you time and headaches. Building your investment so that they grow in value over time requires a lot of factors to go right. And the money part is a big one. It’s not always about the property. It’s how you make the critical decisions about leveraging money so that you have the most control and freedom while growing your portfolio. Whether you’re concerned about the validity of that too good to be true offer on a property or you can’t settle on the right mortgage structure, I can help. I will answer your money questions on a quick call and if I don’t know the answer, I can certainly connect you with somebody who does. Visit GrowingEmpires.com and schedule that call with me today. That’s GrowingEmpires.com and I will help you make smarter money decisions and put you in full control of your investing success.

08:25

So tell me a little bit about what are some of the tax advantages? Yeah, definitely. So the whole life policy does earn dividends and interest from the insurance company. So you will see a growth in your cash value and that growth grows tax deferred. And in most situations, when you go to borrow that money or withdraw that money out of the policy, it is tax free. Because you’re using after tax dollars to fund the policy, the withdrawals and loans are tax free, even if there are gains and this is not always the case. But in most situations it is and of course the death benefit is tax free. So this is a way to kind of convert over from whichever tax bracket you’re in, let’s say 25% to the zero percent tax bracket, by paying taxes on your money first. And then of course, you want to consult with a tax professional on your specific situation. But let’s say that you are in the 25% tax bracket and you converted over to the zero percent tax bracket in the whole life policy. Now, whatever happens to taxes in the future, if they go up, and I think they definitely will go up in the future, you you won’t be affected by that incline in taxes, and your policy will grow tax deferred. So you don’t have to claim the gains of the whole life policy on your income taxes. like you would in other places like a 401k or IRA or, you know other qualified plans. Those are kind of definitely the tax advantages of a whole life policy. Excellent. So how would you use this as an asset protection plan? Yeah, definitely. In most states and you want to research this with an attorney, in most states, the cash value of a whole life insurance policy is protected from creditors and predators and can be leveraged in a lawsuit. Because it’s not treated as an investment. It’s treated as a life insurance policy that has cash value. And it can be an asset protection tool, because you can kind of lock away your money from the public’s view, but at the same time, you will always have access to that money as a loan. So it’s kind of like a way to protect your money. And again, it’s not just the lawsuit part of it, too. But it’s also the economic factors to the financial matters, that if something happens in the stock market, you always have access to this money, and it always grows on a guaranteed and tax favored basis. Interesting. So are there any risks really associated with these policies? No, there’s no risk. But I would say things like to keep in mind, if you do borrow from the whole life policy, you want to pay back, you know, not paying back the policy loans can result in a policy to lapse. So you definitely want to treat it as like your own bank, you’re putting money into the policy, you’re borrowing now, and you do want to pay it back. Of course, that’s kind of the thing to keep in mind. It’s not like free money, where you could just borrow it and never pay it back. You do have to pay back the policy to keep it a living and to keep your money lifting. Understood, have you ever experienced anybody borrowing against it to purchase real estate investments until they got funding lined up, and then to replace that money in that policy, once they got the funding? I have had clients in that situation and you can control the frequency of payments, you can miss payments, as long as your your loan balance does not exceed your cash value, you can extend the loan payment as long as you want until you get the funding or until until you’re able to pay back that loan. Okay, and how is the cash value actually determined? It’s determined by number one dividends, dividends are not guaranteed. But the insurance companies we represent have been paying dividends for over 160 years, including through the Great Depression, through the recession and right now through the effects of Coronavirus in the stock market, they’ve still been paying dividends and interest to from the insurance company because insurance company is investing in the bond market or investing in real estate, they earn profits and they give those profits back via interest in dividends to the policy owners. On average, the insurance company can really give you a specific rate of return. But on average, we’ve seen about three to 5% every year on a guaranteed and compound basis. The thing to remember is, is that the Bank on Yourself concept is not an either/or product. It’s not either I invest in real estate, or I invest in whole life insurance. It’s kind of a way to integrate your investments together. So you have for example, your cash, your real estate, your money in the stock market, and then you would have your whole life insurance policy in the middle of all your assets. So this way, when things don’t go according to plan, you have an asset that’s not correlated to anything else. And that’s still standing, even when other investments might take a hit. And I’m not saying they will take a hit, but if they do you have something to fall back on. So it’s diversification really of your investment portfolio? Exactly. Excellent.

13:09

Well, I think this has been super informative. And I’m sure my listeners have thoroughly enjoyed all of your information, how to get in contact with you and details about your Bank on Yourself organization are going to be listed in our show notes page for anybody interested. But is there anything that I didn’t ask you that you think that our listeners would need to know? Yeah, definitely. I listened to one of your podcasts how to build a real estate portfolio. And it was really good actually learned a lot. We talk about how to evaluate rental properties, I was really informative. And at the end, you mentioned the wealthiest people recycle their money and use other people’s money. And I think this would be tremendous to apply to because you have the ability to always recycle your money, you can put money into a whole life policy and then borrow it out without affecting the growth of the policy. So you can recycle your money and kind of do both invest it and save it at the same time. Oh, well, thank you so much for that feedback. Yes. And I’m also a really big advocate of diversification. I am firm believer that you really do need all of your assets in different places. Because, you know, at any given time, anything could be, you know, stock market could be volatile, the real estate market could be volatile. So it’s nice to know that your money can be in other types of investments that are a little bit more conservative. Mm hmm. I agree. Excellent. So thank you so much for your time today. And again, I will have all of your details in our show notes page to allow our listeners to get in contact with you. Thanks, Jennifer. Thanks for having me. All right. All right, take care.

14:38

For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit GrowingEmpires.com.

Contact for Sarry:

sarry@finassetprotection.com